Learning To Use Your Credit Report
Considering how important your credit report
is to you for a wide variety of reasons, including how aggressively your
car insurance company will price your auto insurance premiums, it is almost
amazing that more consumers are not in touch with what information is contained
on their credit report. Most people are even less aware that there
is an extremely high likelihood that your credit report contains errors,
which will continue to be reported as fact forever until you dispute the
information.
A credit score is a three digit number
that is calculated based on a wide variety of criteria, where that single
number is a key to prospective lenders as to your credit worthiness.
As an example, a score of about 750 to 800 is an excellent score and you
should be deluged with credit card offers because you are considered such
an excellent credit risk. But a score of say 400-450 is incredibly
poor, where businesses may not even accept CASH from you if they know your
credit score.
What are the factors that will typically
lower your credit score? There are several factors that are out of
your control. While not necessarily lowering your credit score, it
is not favorable to have less than a couple of years with the same company
or less than 4 to 5 years living at the same address. Prospective
lenders and therefore credit bureaus love stability, and having several
years with the same company and living at the same address shows stability.
If you have recently changed jobs or moved, that is out of your control
but you will need to depend on other things to elevate your credit score.
If you have high balances on your credit
cards, that will lower your credit score. This is true even if you
make each and every payment on time and pay more than the minimum
amount due each month. If your outstanding balance is more than about
30-35% of your credit limit, this is considered a negative factor.
Of course, it is also negative if you have late payments, and having a
consistent history of late payments is very bad for your credit score.
If you have a lot of "hits" on your credit
report, that is negative. Every time a prospective lender like a
department store or credit card company looks at your credit report, it
is "hit" and keeps a record that such an inquiry was made. The more
of these types of "hits" you have on your credit report, the lower your
score will be, since the theory is that you are looking to expand your
credit abilities, perhaps beyond your financial abilities. It is
additionally bad to have a lot of hits without a corresponding number of
new accounts opened, which probably indicates that you were turned down
for credit.
Having insufficient credit history can
also lower your credit score. Many college students find this after
they graduate and start to establish their credit. The prospective
lender does not have enough credit history information to make a valid
decision about your credit worthiness. For this reason, it is a great
idea to get credit established early, like while in college.
There are many other factors, but one of
the things you can see is that almost anything you do from a financial
standpoint affects your credit score. One of the very best things
you can do is get a copy of your credit reports (all three of them) and
scan them carefully and thoroughly. Studies indicate that it is very
likely there are errors being reported, and getting those errors corrected
can raise your credit score tremendously. These errors will not "self
correct" over time, you need to dispute the information with the credit
bureau that is reporting it.
Author-Bio: For more insights and additional
information about how to Improve Your Credit Score</a> please visit
our web site at http://www.credit-help-center.com
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