The Credit Score
While everyone understands the basics of handling credit payments, there are still some complexities that you might tend to overlook. For example, failing to make payment on time can hurt your credit score. It is important to keep yourself informed with your debts and avoid having too much of it on any of your cards. Unless necessary, do not close your older credit card, or let it so, and only apply for new one when you have to. Maintaining a good credit score will reflect your consumer status. Your credit score serves as basis for lenders in evaluating if you are a desirable loan candidate. A good credit score may let you get special deals on loans or help you lock in low APR rates. On the other hand, bad credit damages your chances securing a loan, open a credit card or rent a home. The banks or lenders will be less inclined to grant you a loan upon seeing a history of bad credit management. Credit score is developed by an Algorithm named FICO score, developed by the Fair Isaac Corporation. There are three “credit bureaus” that collect and report on financial companies. These “credit bureaus” are composed of three corporations namely Equifax, Experian, and TransUnion. These corporations provide general guidelines about financial behavior that affect your credit score, though the exact formula used to calculate your credit score is a tightly guarded secret in the industry. There are several, contributing factors that influence the evaluation of your credit score. The biggest factors are the following:
Payment history includes late payments, collections, and even bankruptcies and tax liens. This makes 35% of your credit score. There is a specified period of time an account will stay on your report, as well as the bad accounts, so it can affect your score differently.
Your debt ratio is the amount you owe in relation to the amount of credit you have available. If you have credit limit of $30,000 and your current balance is $3,000, your debt ratio will be 10%. While it is ideal to have a debt ratio of 0%, it is recommended not to exceed 30% debt ratio. Debt ratio amounts to the 30% of your credit score. This is second to the biggest factors that the creditors or lenders will look for when evaluating your score.
Length of Credit
The duration you have had the credit is called as “length of credit”. Your length credit contributes about 15% of your credit score. While this might seem a lesser factor to think about, there are ways that it can benefit or hurt your score. The longer you have maintained a credit card with good payment history, say, for 15 years; this will impact positively to the creditors. But if you chose to close this, it will not benefit you at all because the credit scoring model does not recognize ones you already closed. On the other hand, if your loans have dragged for so long because of your late payments, it can hurt your score.
Types of Credit
There are various types of credit, and this includes revolving, installment, and mortgage loans. You show the creditors that you are responsible by having different kinds of credit open, so long as you keep a good credit score of course. Inquiries
When you apply for a home loan, this marks as an inquiry on your credit report. While inquiries made by yourself or unsolicited offers do not damage your credit score, this will be shown on your report.
New Credit/Good Credit
There are various types of credit, and this includes revolving, installment, and mortgage loans. You show the creditors that you are responsible by having different kinds of credit open, so long as you keep a good credit score of course. Inquiries When you apply for a home loan, this marks as an inquiry on your credit report. While inquiries made by yourself or unsolicited offers do not damage your credit score, this will be shown on your report. If you need to establish credit, but you have been denied in the past. A secured credit card may be your best bet. Compare some of the most recent secured credit card offers below, and apply for the one that you feel comfortable with! Do remember to read all the terms and conditions, so their are no surprises with regards to fees and high interest rates. Click here to view card offers
According to recent studies, 96.1% of credit reports contained inaccurate information. While there is 29% of inaccurate credit reports that can cause credit denial. Thus, always take advantage of the free copy of annual credit report. This gives you chance to ensure accurate figures of your debt, and quickly correct if there happens to be a mistake. You may find clerical errors; identify theft issues; or clarify incorrect information. If the report shows low credit score, you can immediately begin making a financial rehabilitation plan to begin correcting your bad credit habits. This could be done either by your own or with a certified debt counselor.
A credit report will contain the following: · History of how well you repay debt (Payment History) · How long you have had credit for (Length Credit) · A Credit Report shows your personal information such as names, addresses (past and present), employers, phone numbers, and any variances of such. · A Credit Report shows the amount of available credit you have. (i.e. your buying power) · A Credit Report shows how often you have applied for credit (inquiries) · A Credit Report shows the different types of credit that you have.
Missing Accounts on Credit Report
There are instances that you may be denied of credit due to “insufficient credit file” or “no credit file”. This is because not all creditors will voluntarily supply information to the credit bureaus. This might be the student loan lenders, gasoline card companies, credit unions, or travel and entertainment loans.
Hence, you should consider requesting from your creditors to report your credit information to the credit bureau if such instances arise. Keep in mind that they are not oblige to do so, so be polite in asking.
You can also transfer your credits to other creditors that regularly file report to the credit bureaus.
How credit report mistakes are made
Your credit report may contain errors because the report is inaccurate or contained information about someone else’s report. This can happen by: · You have applied for credit under a different name (Instead of Barbara Smith, you applied under Ara Smith) · You have given wrong Social Security number, or misread by the lender. · Someone made a clerical mistake while making electronic input of your information from handwritten application. · Loan or credit card payments was charged to the wrong account.
What is not included in the credit report?
Your credit report will not reveal your other information such as your savings and checking amount, religion, ethnicity, race, personal lifestyle, political division, and etc.
Can anyone access my credit report?
Under section 604 of the FCRA (15 U.S.C. section1681b), there are certain people who can access your credit report, and only for certain reason. This could mean it may be a potential creditors and employer.
Where can I get a free credit report?
Unlike many websites that require credit card subscription, you may check the annualcreditreport.com for free credit report. This is mandated by the Fair Credit Reporting Act (FCRA) and absolutely free of charge.
The Fair Credit Billing Act (FCRA) Fair Credit Reporting Act (FCRA) The Fair Debt Collections Practices Act (FDCPA)