Know Your Credit Score
What is a credit score history and why is it so important?
For the majority of us credit reports and scores remain a vast enigma, a puzzle filled with endless headaches and therapy sessions. However, as frustrating as it may seem, a credit score in ordinary terms is a snapshot spanning seven years of your credit use. Past payment history accounts for thirty five percent of your score, the amount of money you may owe various lenders holds a whopping thirty percent of your score, how long these debts have been in collection accounts for fifteen percent, and the amount of new credit that you apply for affects only ten percent of your score. Your credit score aka the range’ indicates to lenders how likely you will be to payback a loan in full and on time.
What is the range’ and what does it mean?
Many of us have heard of FICO at least in passing. This acronym can stand for many things but in regard to your credit it refers to the Fair Isaac Credit Bureau Systems. FICO has a score scale, also known as the range’ that begins at three hundred and ends at eight hundred and fifty. If your score ranges between seven hundred an eight hundred and fifty congratulations! You are what lenders refer to as a prime borrower’ and it’s likely that you need not read any further. If you range between six hundred and twenty and six hundred ninety nine then you are what lenders refer to as a sub-prime borrower’ and have an overall OK score but need a little improvement, but if your range is below this than you are high risk’ and the lower the number the worse it is. Do not lose heart though, with a lot of time, effort, and diligence you can eventually bring yourself into the prime borrowers’ category, sometimes all it takes is just a little understanding.
How often should your credit be checked and how does it affect your credit?
So, when should you check your score? It is recommended that you check your score and credit report at the very least once every four months. Still, the best answer for any individual will depend upon their own unique personal and financial variables. For example, if home-buying plans are on the horizon what you don’t know about your credit can hurt you. Successful home purchases rely heavily on timing and it is better for you to know any discrepancies you might be facing ahead of time rather than to wait for the final verdict from a creditor. Checking your credit report does not hurt your credit score.
A few things to remember:
1. Your credit score and history are a snapshot spanning seven years of your credit use.
2. Payment history accounts for 35%, money you owe accounts for 30%, length of time in the system accounts for 15%, and the amount of credit you apply for affects 10%.
3. The range is 300 850, 850 is perfect and anything under 619 is very poor.
4. Check your credit every four months at the minimum.
How to get your credit score.
The big three
There are actually over one thousand regional credit bureaus throughout the United States, however most of them are owned or under contract to the nations three major credit reporting agencies. These three credit reporting giants are TransUnion, Experian, and Exifax. They maintain an enormous database that contains the credit histories of more than two million Americans. As a result over half a billion credit reports are generated each year.
What is in your credit report?
Excellent question. There are usually four types of information contained within a single credit report. These are your identity information, credit information, public record information, and recent inquiries. The information contained in your identifying information section is your full name, any know aliases, current and previous addresses, social security number, your date and year of birth, information about your spouse if you are married, and information regarding your past and present employers. Within your credit information section is the details regarding the accounts you have with banks, retailers, credit-card issuers, utility companies, and any other lenders. Your public records information section contains state and county court records on bankruptcy, tax liens, or any monetary judgments against you. The recent inquiries section contains the names of those who have obtained a copy of your credit report within the past year. If the inquirer was obtaining your report for employment purposes then the inquiry remains on your credit report for two years.
What are the important things to look for in your credit report?
So you’ve pulled your report and now were an expression beyond confusion on your face. Don’t panic. The things to look for when checking your credit report are first and foremost the accuracy of your identifying information. It is not good to start panicking if the history does not even belong to you! Afterwords check the accuracy of the accounts and balances contained on the report, and if any accounts are showing late payments when you really paid on time. These are the basics of where to start.
A few things to remember:
1. The three major credit bureaus are TransUnion, Experian, and Equifax.
2. The four sections contained in your credit report are Identifying Information, public records, credit information, and recent inquiries.
3. If an employer inquires into your credit it remains in your inquiries section for two years, not the standard one.
4. Always check to make sure that the identifying information section is accurate before diving in to the rest of your report.
5. Look for accounts marked as unpaid that were in fact paid on time.
How to fix errors in your credit report
Your fault or not
Now you have looked it over and taken bad and good accounts in. Give yourself a pat on the back that was tough. Let’s discuss the bad accounts. Whether it is your fault or not there are two ways to fix your credit report. First you need to know what is wrong. Next you should gather all of the necessary evidence and documents. Let’s discuss the bad accounts, whether it is your fault or not there are two ways to fix your credit report. First you need to know what is wrong. Next you should gather all of the necessary evidence and documents and prepare to do battle. ALWAYS keep the originals of any documentation involved. Send copies to the credit reporting agencies or to the creditor involved. Sometimes it may take both. Send a letter along with these documents that contains any prior names or addresses during the dispute period, the creditor’s details of the account in question, specific instructions on what is wrong and how to fix it, and notes and references to the documents enclosed. An excellent example of how to write this letter and instructions on what to send can be located easily on the Federal Trade Commission website. It can take several attempts and months to fix a problem, so buckle down and be prepared for the long haul. If this does not pan out it may be prudent to proceed to step two which would be contacting an attorney that specializes in credit law.
A few things to remember:
1. The first attempts at repairing damage should be through letters and documentation.
2. The second attempt when all others have failed should be through an attorney.
3. Keep ALL original copies of your documentation.
4. Consult the Federal Trade Commission website for further details.
Manage your outstanding debt
How is your debt affecting your credit?
Credit card debt is one of the easiest debts to fall into because it is the easiest way to establish credit for everyone. According to the Consumer Federation of America, more than eight percent of all households have some credit card debt. Of them, the average debt is twelve thousand dollars and only ten to fifteen percent of these households are barely able to pay this debt off. It seems staggering, but it is true. So how do you pay yours off? It is highly recommended that in order to successfully pay off all debts alike you pay a substantially higher payment than the minimum when you can and keep spending to a minimum. Some other types of debt that you may encounter on your credit report are mortgages, loan of any kind, and medical bills. Once you have reached a resolution with your creditors it is important to keep all accounts in current and good standing in order to further repair and to prevent any further damage done.
Debt Consolidation
Oh boy, now it seems like too much, but before you go run to the nearest debt consolidation company you may want to hold on and first seek credit counseling. It might be easier on you to consult an expert on finances that can help you establish a plan and budget for tackling your mounting debt. If you go this route it may be easier for you to maintain your plan to improve and clean your credit. It is always wise to be wary of these though. Some things to watch out for are credit counseling organizations that charge high upfront fees, pressure you to make a voluntary contribution, won’t send you free information without first obtaining your personal and financial information, and organizations that push you to enroll before your creditors have made any agreements regarding your debts.
You should always first seek to resolve your credit issues on your own as a Debt Management Program does have a long term negative effect on your credit. Also, thoroughly research the company you are planning to use on the World Wide Web and with the better business bureau before jumping in feet first.
A few things to remember:
1. Pay a higher payment than your minimum payment to reduce and pay off debt.
2. Once the issue is satisfactorily resolved by both parties keep the account in good standing
3. First seek credit counseling when looking for aid.
4. Always investigate
5. A Debt Management Company can resolve issues with your credit, but will leave a long term negative mark on your credit.
New Credit
Why you should open a new line of credit while repairing your bad credit
Often lenders and creditors will view an individual with now revolving lines of credit as a high risk especially if you have bad credit. Because of this it is a good idea to obtain a fresh line of credit when trying to repair and annex bad credit from your history. There are two types of credit cards available, secured and unsecured. Your best bet is to apply for a secured card when rebuilding your credit, most banks offer them. Many of them require a deposit or collateral and they will issue a credit card to you with a limit matching either the full amount or a percentage of your total deposit or the value of your collateral.
An unsecured credit card is best defined as credit that is issued and not backed by collateral or assets that are pledged to make sure the credit is repaid. They require no deposits. It is not that an unsecured card is a bad idea when rebuilding credit; it is just exceedingly difficult if you have bad credit to find a lender who will issue you one. In regards to both types there will likely be an annual fee, a onetime set-up fee, and a monthly maintenance fee in conjunction with a higher interest rate than normal, but the cons outweigh the positive effects on your credit if you maintain the card in good standing and keep the balance low.
A few good resources for obtaining a card with bad credit are First Premier and Orchard Bank. They both can be easily located online and offer excellent customer service.
A few things to remember:
1. Secured cards require collateral or a deposit and give you the full amount or only a percentage of the value
2. Unsecured Cards do not require a deposit or collateral
3. Once you open a new line of credit keep it in good standing.
4. Two good resources are First Premier and Orchard Bank.
Keep an eye on Your credit score from now on!
After all of the immense effort and time you will inevitably invest throughout this process it is highly unlikely that you will want to backslide into the bad credit abyss once again. There are many agencies available today that can monitor your credit for you. Perhaps the most well-know of these is the giant freecreditreport.com. Use it. They will keep a close vigilance over your report so that you don’t have to worry. They will notify you of changes within your credit report and keep you up to date on your score. If you do not have the luxury however of spending the few extra dollars keep on top of your score and report by checking in at least every four months. It may seem like a huge investment of your time and effort, and it is, but it is one that you will appreciate in the future immensely. No longer will you have to feel shame when applying for a loan, buying a car, or even buying a house. No longer will you have to dread answering the phone or screen your calls for collectors. The effort is well worth the peace of mind it will bring when you look at and step into the future .
A lot of things to remember:
1. Your credit score and history is a snapshot spanning seven years of your credit use.
2. Payment history accounts for 35%, money you owe accounts for 30%, length of time in the system accounts for 15%, and the amount of credit you apply for affects 10%.
3. The range is 300 850, 850 is perfect and anything under 619 is very poor.
4. Check your credit every four months at the minimum.
5. The three major credit bureaus are TransUnion, Experian, and Equifax.
6. The four sections contained in your credit report are Identifying Information, public records, credit information, and recent inquiries.
7. If an employer inquires into your credit it remains in your inquiries section for two years, not the standard one.
8. Always check to make sure that the identifying information section is accurate before diving in to the rest of your report.
9. Look for accounts marked as unpaid that were in fact paid on time.
10. The first attempts at repairing damage should be through letters and documentation.
11. The second attempt when all others have failed should be through an attorney.
12. Keep ALL original copies of your documentation.
13. Consult the Federal Trade Commission website for further details.
14. Pay a higher payment than your minimum payment to reduce and pay off debt.
15. Once the issue is satisfactorily resolved by both parties keep the account in good standing
16. First seek credit counseling when looking for aid.
17. Always investigate
18. A Debt Management Company can resolve issues with your credit, but will leave a long term negative mark on your credit.
19. Secured cards require collateral or a deposit and give you the full amount or only a percentage of the value
20. Unsecured Cards do not require a deposit or collateral
21. Once you open a new line of credit keep it in good standing.
22. Two good resources are First Premier and Orchard Bank.