Credit Scores Tips
Read these 20 Credit Scores Tips tips to make your life smarter, better, faster and wiser. Each tip is approved by our Editors and created by expert writers so great we call them Gurus. LifeTips is the place to go when you need to know about Credit Report tips and hundreds of other topics.
Having No Credit Score
Having no credit score is not the end of the world. It just shows your lack of experience with credit. To build up a good credit score, you can get experience by having a cosigner on your first loan or credit card. Over time, you will slowly build up more experience. If you make your payments on time, keep the amount of debt you have to a minimum and avoid major negative items like collections, you will be well on your way to exceeding the minimum credit score.
Highest Credit Score
Having the highest credit score puts you in the driver's seat when it comes to working out the terms for your next loan. Not only does this make it easier to qualify for a loan, it also puts you in a great position to get a better interest rate, as well as negotiate other terms on your loan. Maintaining this score is to your advantage since it always makes getting credit that much easier for you.
The Bad Credit Score
When your credit score falls below 650, you have what is considered a bad credit score. While it's not terrible, it's also not ideal. It may make it harder for you to qualify for some credit cards or loans. This credit score can put you in a position where the interest rate you are charged is higher than for someone with excellent or even an average credit score.
Calculate Your Credit Score
A credit score calculation takes into account your payment history, amount of debt, number of inquiries and negative credit items. The actual formula varies between the credit reporting agencies. In addition, the three major credit bureaus do not share information. This explains why you could have a higher credit rating through one agency than another. Your credit score calculation is dependent on information being reported accurately, as well as the formula used by the credit reporting bureau.
Free Credit Scores
Is there really such a thing as something free in life? You bet. You can get free credit scores. These scores are usually available online and may, in actuality, be an estimate rather than accurate credit score numbers. If you receive an offer to get free credit scores, check out the legitimacy of the source first. Use a reputable source, like Credit.com to obtain free credit scores. Before you apply for a free credit score offer, also make sure you understand what you are receiving. They should provide credit score information that you can interpret.
Credit Score Range
When you seek an estimate of your credit score using a credit score estimator you may be given a credit score range. This isn't telling you exactly what your score is, but merely providing an estimate of what it could be based on the information you provided. If you used incorrect information to come up with the estimate, don't count on your actual credit score being similar. The only way to know your actual credit score is by requesting your credit report and credit score.
What Is A Credit Score?
Credit scoring has been around for quite awhile now but the method was kept secretive for many years. Banks didn't want customers to know that a mathematical formula determined if someone could qualify for credit. Now this is common knowledge. What isn't well understood is the credit score analysis. Understanding credit scores is not complex when you realize that most of your credit history is included. From the amount of debt you have to the number of times you seek new credit. These are used to determine credit scores, which are then used by banks to indicate if you are a good risk to provide additional credit. The higher your score, the lower credit risk you have and the more likely a lender will offer you a loan.
Credit Score Ranges
There are different credit score ranges, but in general, credit scores range from 300 to 850. Each of the three largest credit bureaus has its own method of calculating credit scores, but each is roughly equivalent. A credit score above 720 is considered a very good credit score. Credit scores of 620 to 650 are generally considered good. A credit report score of 620 is generally considered fair, and a credit report score below 600 is considered poor.
Factors Used to Determine Credit Scores
There are five factors that go into determining your FICO score, and each is given different weight in the calculation. Past payment history accounts for 35% of the credit score. The amount of outstanding credit you owe counts for 30%. The length of your credit history counts for 15%, including length of time since you established credit and the length of time since you last used the credit. New credit, or the number of times you have recently applied for accounts, counts for 10%. Finally, the types of credit used counts for 10%. If you don't know what your credit score is, experts recommend you find out and regularly monitor the information affecting your credit reports and credit scores at each of the three credit bureaus.
Impact of Canceling Credit Cards
Thinking about cleaning up your credit report by closing old accounts? Think again! Closing old credit accounts does not help boost your credit and can actually damage your credit score. Be especially careful to avoid closing the oldest account on your credit report. Closing this account would cause the most negative impact. It helps your credit score to have accounts open for a long time."
About Credit Scores
A credit score is a numeric value that most commonly ranges from 300 to 850 and that is calculated based on a number of different factors. The single-most important factor in determining your credit score is your past repayment history. Credit reporting data is maintained by the credit bureaus on more than 170 million Americans. Credit scores are calculated directly based off current credit data, then subsequently pulled by lenders. A score does not exist until they are ordered by a lender or consumer. Since there can be errors in the information contained in a credit report and the corresponding credit score, personal finance and identity theft experts recommend that you check your credit scores all three credit bureaus at least three to six times a year. Federal law entitles consumers to a free credit report and score from Equifax, Experian, and TransUnion once every 12 months.
Variation in Credit Scores
Each credit bureau (Equifax, Experian and TransUnion) keeps an independent credit file on you. This credit file is used to calculate your credit scores. Because of variations in the information on your credit files, your credit scores could vary depending on which credit bureau is used. Credit scores can also vary depending on the credit scoring formula used for the calculation. If you're wondering what your credit scores are at each of the credit bureaus, you can request a free credit report from each company at www.annualcreditreport.com. You are limited to one free credit report per company every 12 months.
About Promotional Inquiries
The information maintained in credit bureau databases is in demand by everyone from potential employers to direct mail marketers and landlords. Aside from lenders from whom you are seeking credit, some home owners and auto insurance companies are basing premiums, in part, on credit report scores. For a fee, companies wishing to sell you something can submit a list of criteria to the credit bureaus to receive a list of names and addresses of people who meet the criteria. These “promotional inquiries” can include some very basic credit information. Any company you current hold a credit account with can periodically check your credit score to make sure you are still a good credit risk. Other businesses or individuals, such as potential employers, utility companies, or landlords, can access your credit report assuming you give the permission.
Personal Finance and Your Credit Score
Your credit score affects you in many ways, some are more obvious than others. For example, when you apply for a loan or a credit card, your credit score helps to determine if you will be approved, how much you will be approved for, and what interest rate you will be charged. Then there are the not-so-obvious ways your credit score affects you. Even if you are approved for credit, the creditor can monitor your credit score over time. Even if you pay some credit accounts on time and others late, the creditors you pay on time may still boost your interest rate. Other examples include insurance companies that will use a type of credit score called an "insurance score." And in addition to the first and last month's rent and references, some landlords now request permission to check your free credit score. Over time, companies and individuals will undoubtedly develop more uses for credit scores. If your credit score could use a boost, start taking steps today to improve it. Doing so will open doors for you down the road.
Know Your Credit Score
Knowing your credit score is one of the smartest money moves you can make. You can obtain your credit score directly from any one of the three large credit bureaus: Equifax, Experian, or TransUnion. Each company maintains an Internet commerce site from which you can order your information. Each also offers credit monitoring services and packages that include your credit score from all three bureaus, which can vary by as much as 50 points. Prices vary, but generally range from $9.95 to $59.95 for the different services and products. You do not have to pay for your annual credit report, but you do have to pay for a credit score. There are two ways you can get a credit report and credit score. Federal law allows you to receive a free copy of your credit report within 60 days of being denied credit if the decision was based in full or part on your credit score. The lender must notify you in writing of which credit bureau was used during the application process and give you instructions on how to obtain your free credit score and report. Even if you haven't recently been denied credit, you can get a free credit report once every 12 months from Experian, Equifax, and TransUnion under a new federal law designed to help people protect their private information. For more information, visit www.annualcreditreport.com.
Marriage and Credit Reports
There is a common misconception that when two people marry their credit histories become one the minute the two tie the knot. This is only partially true. When two people marry, each retains his or her individual credit history up to that point. As the couple incurs debt in both names, such as a mortgage, car loan, or credit card, the payment history for these credit accounts gets reported to both party's credit histories and affects each individual's credit score. However, credit accounts held in one or the other spouse's name do not appear on the other's credit report.
FICO vs. Credit Score
A FICO score is a brand of credit score. FICO stands for Fair Isaac Corporation. Fair Isaac is the company that developed the software program used by the credit bureaus to compile and calculate credit scores for U.S. consumers. You can learn more about Fair Isaac at the company's Web site. In addition to the FICO score there are hundreds of different types of scoring models used today.
Best Way to Achieve the Perfect Credit Score
Many people ask how they can achieve the perfect credit score but few even know how a credit score is rated. A full 30% of your credit score is determined by your credit utilization. This means you cannot have a perfect credit score if your credit cards are charged up to the max or even close to the credit limit. For those who have charged up their credit card, finding solutions to reduce the debt will raise the credit score. The more you reduce the debt, the higher the credit score.
The goal in maintaining a credit ratio that will most help your credit score is to maintain a balance between 1 and 20% of the credit limit. A paid off credit card is not as beneficial to your credit score as a card with a small balance. The higher your balance rises, the farther you get away from achieving the perfect credit score. The good news is as soon as you lower your card balances, your credit score will bounce up.
The credit utilization factor in the credit score is the only component of the score that you can change almost immediately. By reducing your credit card debt to under 20%, you are one step closer to obtaining the perfect credit score that you dream of.
Credit Score Meaning
Get a credit score explanation after you find out what your credit score is. By understanding what that number is based on, you can identify problems and make improvements to your credit report. Getting your credit scores explained can also put you in a good position to negotiate the interest rate you receive on a loan. While this may not work with all financial institutions, most people don't realize that it is possible to negotiate the interest rate and other terms for your loan. It takes knowing your credit score to put you in a position to try for better terms of your loan.
Check Credit Scores
Find out what your credit score is by looking for online credit scores. You can find online credit scores at Credit.com, along with other helpful offers. This can provide you with quick and easy information so you know what to expect before applying for additional credit. If you plan to make a major purchase, like a home, in the near future, it is a good idea to start getting your credit in order as soon as possible. Bad credit or inaccuracies can make getting a loan difficult. It could also mean that you are charged a higher interest rate. The only way to avoid that is to make improvements to your credit report early, which will also increase your credit score.
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