Understanding Credit Scores Can Make All The Difference
Submitted by: I-Newswire
2012-01-18 01:00:19
Know how your score is determined and how it can work for or against you
California (OPENPRESS) January 17, 2012 - Everyone who has credit has a credit score. Not everyone understands, however, what that score means.
A credit score comes from the Fair Isaac Company, which came up with the process of using your credit information to determine a three-digit number, which is known as your credit score. The three credit reporting bureaus - Experian, Equifax and TransUnion - also have credit scores, but each uses its own criteria for figuring the score, so the number will vary from bureau to bureau. Your FICO credit score is considered to be "the" number that lenders use when considering your application for a loan or for credit.
It is important for you to understand your credit report, since it is used to determine what interest rate you get or the down payment on your home, or even whether you can obtain employment or insurance. Got a low score? You'll find that interest rates for you are much higher on loans and credit cards.
What's a good credit score? Scores range from 300 to 850 - over 750 is considered excellent, 720+ is considered very good, 660-720 is considered acceptable, 620-660 is uncertain, and anything less than 620 is considered risky.
Your credit score is made up of 35 percent payment history, 30 percent current debt, 15 percent credit history length, 10 percent new accounts and 10 percent mix of credit types.
If your credit score is a number that is lower than you'd like, it's not hopeless. There are things you can do to raise your score. The simplest and easiest thing you can do is to simply pay your bills on time, every time. Consider setting up automatic payments for each of your creditors. This is a quick and easy way to be sure you never miss a payment or make a payment late ever again.
Another important thing you can do is to avoid maxing out your credit cards. Using your cards to their limits lowers your score. It's also a good idea to avoid applying for too many cards at one time. This can make creditors leery of you, thinking that you are either desperate, manage money poorly, or both.
If you are experiencing some sort of dispute with your creditor, don't let it go until you find yourself in collections, even if you are in the right. When your account goes to collections, it becomes a negative mark on your credit, and you lose points. It's better to just go ahead and pay, then file a claim in small claims court.
