What Does Your Credit Score Mean?
Your credit score is a 3 digit number that is assigned as a convenient way for lenders to understand how credit worthy you are. It is often used to help them decide whether you qualify for credit and what the associated interest rate will be.
Anytime you apply for credit, your lender is likely to request a copy of your credit report which includes lots of information about your current credit standing. It will also include the numeric credit score. Since lenders can easily get their hands on this information, it is beneficial to you if you review the details yourself from time to time.
There are three companies that generate credit scores: Equifax, TransUnion, and Experian. They generate a number between 300 and 850. This number is often called the FICO score, which stands for Fair Isaac Corporation.
Here is a quick breakdown of the FICO score values:
• 720-850 – this is the range of average scores and better, a very good range
• 700-719 – rates may not be as good as above, but your credit is still decent
• 675-699 – at this level you are starting to lose out on the best deals
• 620-674 – you cannot get great terms here as loans will cost you extra
• 560-619 – this is really subprime so you’ll have to work to improve
• 500-559 – it’s going to be tough to get any loan
You can find another analysis of the numbers on our credit score rating scale page.
Among the factors that determine your score include your own credit history, the amounts you owed, how much remains, the duration of credit history, and the type of credit you have used.
You can improve your score by paying down any debts, staying well under your credit limit, and pay all bills before due dates.
Explore other resources on this website to learn more about your credit score and how to improve it.
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Categories: Credit Score Articles Tags: Credit Score, credit score factors, Credit Union, FICO, FICO score, history, used
Explaining Your Credit Score
You probably want to know the precise details in terms of calculating your credit score. It actually takes a little while to finish it and it is done by three companies and they all have their own ways to come up with the results. Thus, a credit score from one company can come out different from the other. To have an estimate on your credit score on your own, take into consideration some of these factors.
If you don’t own a credit card, don’t have any type of bill in your name, or haven’t tried borrowing money, you basically have a zero credit score. Actually, it’s not considered as a bad credit, it will just be hard for you to get a loan if you have no credit at all. However, there are some lenders willing to run the risk and let you borrow albeit without credit. But generally, it’s always better to build up credit.
You credit history will make up around 35% of your credit score, so it is very crucial. If you have unpaid bills or debt that you were not able to repay, it will be listed in your name and it will take 7 to 10 years before it gets deleted.
Every little bad decision you make will ultimately affect you credit in the long run, of course, negatively. If you are trying to make up for unpaid debts, it will still apparently appear on your credit report as bills that were paid late.
The length of your credit history makes up for 15% of your total credit score. Thus, as soon as you can, start building up credit. It will improve over time just as long as you have your bank account maintained. Essential information such as length of employment as well as residency will also fall in to this category. Therefore, it is more ideal to be stable in life than always having to move around.
Furthermore, 30% will actually be based on your current debts. Even when you’re always on time with your payments, if you have multiple loans at a time, then you run the risk of being denied more credit. So always get only the loans that you badly need and be punctual in paying as you don’t only boost your credit rating, you also get to save a significant amount of money on interests. If you do so, it will show on your credit history so you’ll be given lower interest rates on your future loans.
10% of your credit score will depend on new accounts. They will check how many types of loans you have and how many you currently have open. Remember not to open or close any account abruptly as this can be detrimental to your credit rating.
Always be cautious and educated. Knowing things like how a credit score is being calculated can help you find errors if there is any. Get your free annual credit report and review meticulously to make sure your credit score is how it is supposed to be.
Categories: Credit Score Articles Tags: Credit, Credit Score, Credit Score Explanation, history, long, name, time
Foreclosure and Its Effect on Your Credit Score
Foreclosure is the lawful procedure that terminates the rights of a homeowner and gives the ownership to the mortgage lender. This happens when a homeowner fails to pay the monthly mortgage payment as agreed upon.
Foreclosures can greatly affect one’s credit score, but you can avoid it if you have control over your finances to begin with. If you have been included in the foreclosure listing, it can decrease your credit score by up to 250 points. The severity of this damage, however, depends on your credit history.
If you have been paying your credit card bills and other loans on time, it can positively alter the impact of the foreclosure. If the amount of your current debt is considerably lower than the amount of your available credit, then the effects of the foreclosure on your credit score can also be tempered.
Payment history makes up 35% of your total credit rating, and your late mortgage payments are included here. Current debt makes up 30%, the length of your credit history accounts for 15%, your credit card and installment loan balance makes up 10%, and your recently opened credit account makes up 10%.
Foreclosure accounts are normally listed in the Public Information category of your credit report and it will be there for seven long years. However, during that period, the effects of the foreclosure on your credit score lessen as each year passes by. New home loan applications will be considered three years after a foreclosure.
If, by error, the foreclosure is still present in your credit report even after seven year, you can file a complaint so that the credit bureau will have it removed. The three credit bureaus that are held accountable for the information in your credit file are TransUnion and Equifax and Experian.
If you’re not good at handling your credit, a foreclosure is inevitable. And even though the effects of foreclosure lessen with time, you still don’t have an excuse to live outside your means.
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Does Misdemeanor Affect Credit Score?
When you borrow money, the lender will be reporting it to the credit bureau. Such information will be displayed in a 3 digit score. The bureaus don’t make public how they come up with these scores. However, they look into the amount the person owes, the repayment behavior, the duration of the person’s credit history, the different types of credit that the person uses, and the number of credit applications that the person has.
The lower your score, the riskier you come off to the lender. People with poor credit can be denied loans or lent money at sizable interest rates. On the other hand, those that have good credit standing are lent money more conveniently at a low interest rate.
A credit report will have the person’s name, date of birth, address, Social Security Number, driver license number and address. The employment will also be involved. Moreover, it will display the amount that one has borrowed and was able to repay in the past 7 years, liens and bankruptcies included. If you happen to have defaulted on a debt or missed a payment, it would reflect on the report.
A person’s income or savings will not reflect on the report, though. It would also not display your criminal record, religious beliefs, medical history or sexual orientation. That being said, a misdemeanor will not show on your credit report. It will only be displayed if a criminal background check is done. Any misdemeanor will always be shown in one’s criminal record, it can give you a hard time landing a job. Misdemeanors don’t have any bearing on one’s desire to get a mortgage or credit card, but it could pose a problem when he/she wants to rent a home.
Categories: Credit Score Articles Tags: amount, Credit Score, credit score factors, criminal record, history, misdemeanor, person
3 Credit Score Myths
The credit score a certain persona is indicative of his financial standing. Many agencies, on a regular basis, look at your credit score, from banks, credit unions, utility firms, landlords, insurers and even employers.
Myth 1
The Major Credit Bureaus Make Use Of Various Formulas In Coming Up With A Credit Score
This is considered to be the most common among all. Truth of the matter is, the major credit bureaus, from Experian, Equifax to TransUnion have a different term for the same score. TransUnion, say, calls it the Empirica, while Experian calls it the Experian/Honest Isaac Risk Model. They may have different names for the credit score, but they make use of the same formula in computing it. While the names used by the major credit companies are essentially the same, lenders often use just one credit report, to analyze your loan application.
Myth 2
Merely Paying Off All Your Debts Will Instantly Repair Your Credit Score
Your credit score will always be affected by your past credit history, and it’s not about your present debt. You can quickly pay off your credit card debts and settle any other outstanding obligations, but our previous history of late or missed payments will still reflect on your score.
Myth 3
Closing Old Accounts Helps Boost Your Credit Report
This is delusional. Closing old accounts will never have an impact on your credit score, but opening these old accounts will surely hurt your score. Having too many accounts also incurs damage to your credit score, because your score is typically affected by the difference between the available credit and the credit being used. Closing an old account will make your credit report look new, but the damage is done.
Categories: Credit Score Articles Tags: closing, Credit History, Credit Rating, Credit Score, credit score myths, history, look, used
What Makes Up Your Credit Score
If you don’t have any idea what goes into your credit score, you can’t do much about it. If you know what elements go into coming up with it and how it is calculated makes it possible for you to have more control over your financial status.
1. The most significant part of your credit score will have your history of making payments as a basis. This accounts for 35% of your total credit score. Then, if you have an impeccable record of prompt payments, then this is actually good news. Nevertheless, if you always forget to pay a bill, then it would be otherwise.
2. Your blend of credit makes up 10% of your score. Having a mortgage, car loan, credit card and maybe a store account that you pay on is a sign to the agencies that you can handle different credit options. See to it that you can handle all of them, though, given that not paying on time on even one type can count against you.
3. 15% of your credit score will be determined depending on how long you have had a credit history. Certainly, the better you have handled that credit in the past years, the better it will be for your score. However, it would still be better to have a more established credit record than a shorter one.
4. Second in weight to your payment history will be the total amount of your debt. This factor makes up for 30% of your score. The debt you owe is compared to your income in what is called the “debt to income” ratio. The lower it is, the better. You must target keeping your total debt at 25% or less of your annual income to have the best effect on your rating.
5. New inquiries into your credit can be an indication that you may be overextending yourself and account for 10% of your total score. The one exception will be the case wherein you are the one looking at your credit report.
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Will secured credit cards build credit history?
Question by deedee: Will secured credit cards build credit history?
How long would it take if I used this method to build my credit history? Will I be eligible for regular credit cards if after this? Im trying to build my credit up and fast! I have no credit history right now.
Best answer:
Answer by Frank
Yes, they will, if you pay on time. Don’t pay late. Don’t pay late.
And don’t think that using them more will make youre credit better. Your credit report shows the number of times you paid late, the amount you currently owe, and the maximum you ever owed on that account.
If you use the card one month and then pay it off and stick it in a drawer for 11 months, that will look exactly the same one your credit report as if you used the card every month for 12 months and never paid late. So don’t fool yourself into buying more stuff to help your credit, because it won’t make a bit of difference.
Add your own answer in the comments!
Can I get a good credit history if I’m paying my bills just before its due date?
Question by zack.spear: Can I get a good credit history if I’m paying my bills just before its due date?
Because I hate interests/financial charges accumulating when it’s late.
Best answer:
Answer by AnswerGuy5
Pay your bills on time. This is the best way to improve your score, and it’s never too late to start. Even if you’ve had serious delinquencies in the past, those will count less over time if you keep paying your bills on time.
Give your answer to this question below!
Dispute Credit Report; Improve Your Credit Score By Learning How To Interpret Your Credit Report, Stand Up For Your Rights As A Consumer, And Use Effective Strategies To Dispute Your Credit History Reviews
Dispute Credit Report; Improve Your Credit Score By Learning How To Interpret Your Credit Report, Stand Up For Your Rights As A Consumer, And Use Effective Strategies To Dispute Your Credit History
Do you want to learn how to repair your credit without paying an agency to do it for you? Would you like to learn your rights from the Fair Credit Reporting Act? Do you want to know practical steps you can take to dispute errors in your credit report and how to improve your credit score? This guide, Dispute Credit Report will begin by teaching you the components of your credit report. Next, you will learn what rights you have under the Fair Credit Reporting Act and how you can use those to your advantage in disputing your credit. Then, this guide will show you how to dispute errors, and even give you a sample letter when writing to the three credit agencies.
Even though we have the right to check our credit reports once a year, very few of us do on a regular basis. It is also easy to be confused by reading through the report and the various accounts listed and how all of the information culminates into our credit score. As you read this guide, you’ll be able to understand the different components listed on your credit report and why it is important to routinely request and double check it for errors. This will also help to protect you from identity theft. In addition, you’ll learn how to legally dispute items in your credit report and begin to work towards improving your credit rating.
Check out some of the great information within this book! Here is a list of the chapter titles:
Chapter 1: What’s In A Credit Report
Chapter 2: Credit Reports And What To Do With Them
Chapter 3: Credit Report Information – Helpful Advice You Need To Manage Your Credit Profile
Chapter 4: Discover the Parts of a Credit Report and What They Mean
Chapter 5: Credit Report and Credit Score
Chapter 6: Check Your Credit Report
Chapter 7: Do You have Negative Credit Information in Your Credit Report?
Chapter 8: Credit Reporting Errors
Chapter 9: The Truth About Credit Report Agencies
Chapter 10: Secret Credit Reporting Agencies Exposed
Chapter 11: What To Do About Negative Information In Your Credit Report
Chapter 12: Review Your Credit Report And Correct Errors
Chapter 13: Making Sure Your Credit Report Is Correct
Chapter 14: Disputing Credit Reports—What You Need to Know
Chapter 15: Ways To Resolve A Credit Report Dispute
Chapter 16: How To Dispute Mistakes On Your Credit Report
Chapter 17: How To Dispute Problems on Your Credit Report
Chapter 18: Resolving Credit Card Disputes
Chapter 19: How To Fix Your Credit Report
Chapter 20: The Benefits Of Fixing A Bad Credit Report
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How does one really build a credit history in the US if you have had none?
Question by Iverology: How does one really build a credit history in the US if you have had none?
If one obtained a secured credit card from a bank, is it true that you should not spend more than 50% of your limit? Also, that you should not pay your balance in full but only the minimum amount to “start building your credit score?”
Best answer:
Answer by Joseph M
A secured credit card is an option. The revolving line of credit should report to all three credit bureaus monthly, and generally reports the balance on the date that your statement closes as the balance on the account. Owing more than 30% of the credit line can negatively impact your credit score.
In addition to the secured credit card, an installment loan can have a positive impact on your credit.
As long as you make at least the current payment due, on time, the credit bureaus will still report you current. The size of your payment will not “boost” your credit score.
What do you think? Answer below!