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Y O U R C R E D I T
Why do Credit Scores matter and how do I improve mine.
There are three credit reporting bureaus in the US: Experian, Equifax, and TransUnion. All three companies use the FICO calculation to create your credit score. Even though all the companies use the same calculation method, all three will typically deliver a different score. Most lenders will use the middle of the three scores as the one for determining your interest rate. If you only have two scores, they will use the lowest one.
Credit scores are based on more than just payment history. The credit bureaus use five factors to determine your score. These factors are:
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Your payment history: About 35% of your score. Having a perfect payment history does not mean having perfect credit.
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How much you owe: About 30% of your score. Maxing out your available credit will lower your score.
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Length of credit history: About 15% of your score. A longer history will increase your score.
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New credit: About 10% of your score. Your credit score will factor in any new accounts.
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Other factors: About 10% of your score. Other factors can influence your score, such as having a mix of different types of credit.
Common Myths
Shopping around for a loan hurts your score. Within any two-week period, all credit scores pulled by loan companies count as one score. Credit reporting bureaus know that you want to shop around for a loan.
Checking your own credit will lower your score. You can check your credit score as often as you would like. Checking your own credit does not count as the type of inquiry that will drop your credit score.
Your age, income and sex are factored into your score. Credit reporting bureaus can't use this information when determining your credit score.
A higher salary will boost your score. Your income is not a factor when determining your credit score.
To remove unfavorable info just dispute it. You can have information removed from your credit score if it's incorrect. Credit reporting companies will not just remove unfavorable information if it belongs to you.
Credit card offers are hurting your score. Only when you accept the offer, and fill out the application. Just receiving these in the mail will not affect your score.
When you get married your credit scores are merged. Your credit scores are not merged when you get married. If you take out debt with your spouse, then it will show up on each credit report.
General Ways to Improve Your Credit Score
Pay your bills on time: You should always look to pay you bills when they are due, and this is one of the factors that is used to determine your score.
If you have missed payments, get current and stay current: Late payments will affect your score, send your bills in before the due date.
Keep your balances low: One of the factors used to judge your credit is the amount of available credit that you are using. Most experts recommend only using between 25-30% of your available balances.
Pay off your debts rather than moving them from card to card: It's always a good idea to pay down your debt instead of moving it from one place to another.
Don't closed unused credit cards: This will decrease the amount of available credit that you have and may lower your score.
Check your credit score: Once a year, you are entitled to a free credit report from all three credit reporting bureaus. Click onto www.annualcreditreport.com for more details.
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