Credit Scores
Credit Scores
A credit score is a mathematical formula used to determine a person’s credit worthiness. It is based on statistical analysis on a number of factors. The range of a credit score number is between 300 and 850. A 700 plus score is considered good credit. The sources of credit history are from three bureaus, Trans Union, Experian and Equifax.
Credit scores are used to determine a lender’s risk of a providing a loan. This score determines qualification, interest rate and credit limits for loans. It is imperative to have or acquire a good credit score for financial health reasons.
It is important to have or aspire to have good credit. Good credit affects your future loan applications in terms of acceptance, great interest rates, and how much you can borrow. Renting apartments and insurance are based on your credit rates. Deposits for phones and utility companies are also based on credit scores. Financial navigation is much easier with a high credit score.
Your credit score is also referred to as a FICO score. The three bureaus have a different numeric range of score reports.
Equifax 300-850
Experian score 330-830
TransUnion score 150-934
There are five parts to a credit score.
Payment History - 35% of score
Have you paid your bills on time? Late payments hurt; on-time payments help.
Debt – How much you owe 30%
Your debts are analyzed per credit limits and amount used.
Length of credit history 15%
A longer history will increase your score with on-time payments.
New History 10%
If you have recently applied for new credit, this factor will weigh into your score.
Other 10%
Minor factors such as having a mix of credit types help your score.
Your credit report can be obtained free of charge at
www.annualcreditreport.com. Review your scores yearly and make notes on those items that can be improved. Check for mistakes and omitted information. If you have questions, contact that credit bureau. You can also dispute wrong information on your credit report.Additional tips for good credit
Keep balances low on credit cards.
Pay your bills on time
Only apply for new credit if it is needed.
If you missed payments, get current and pay your bills on time in the future.
Pay off debt instead of applying for new credit cards.
Consider setting up an automatic draft for consistent on-time payments.
If your credit score is not as high as you would like it to be, don’t give up. Address the problem and do your homework on ways to increase your score. Beware of credit repair scams that require an upfront payment. There are no quick fixes. The best way to improve your score is to pay your bills on time for an extended length of time.
Categories: Buying
Tags: Credit Scores Credit History FICO
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