Credit Score Explained
There are businesses that exist
solely to scrutinize your credit history. Credit card companies and other
lenders rely on this information, so your credit score determines your chances
to borrow money — and how favorable the terms will be.
The three major credit-reporting
agencies—Equifax (www.equifax.com), Experian (www.experian.com), and TransUnion
(www.tuc.com)—offer reports to you by mail or via the Internet. Order one from
each; you should give your credit report a yearly checkup.
Credit scores can range from 200 to
above 800. Scores below 620 are considered risky; 720 and above earn excellent
rates and terms.
There are five categories used in
determining a credit score:
l Payment history (35% of score):
Late payments and amount owed are the two areas scrutinized most closely.
l Amount owed (30% of score): Large
outstanding balances do not necessarily damage your score. The significant
factor is the percentage of total available credit you’re using on your credit
cards. Consolidating many small credit card balances onto one card actually
causes your score to go down.
l Length of credit history (15% of
score): You need credit to get credit, so there’s no way to improve this part
of your score other than to wait.
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l New credit (10% of score):
Applying for too much new credit in a short period of time is a common and
costly mistake. Your score drops from too many credit requests in a short time.
l Types of credit (10% of score):
This considers the overall mix of credit —loans, mortgages, credit cards, etc.
Unfortunately, scoring companies won’t disclose how accounts are weighted.
Lenders receive your score and
“reason codes,” so examine these reason codes; they’re the keys to improving
your score. When you get your report in the mail, you'll also want to review
the following items:
Check that all items are correct.
Notify the credit bureau in writing of inaccuracies. Use certified mail to send
them copies of documents that dispute the incorrect entries. They have 30 days
from receipt to adjust or verify the data.
It’s possible that someone else’s
information might be attributed to you. You have an obligation to correct the
information.
Look for inactive accounts. Close
any accounts you don’t use.
Check for late payments. Request
that those older than seven years be removed.
Verify and update your accounts
and account numbers.
Verify your address and Social
Security number.
Wait to Buy Big Ticket Items Until you Buy Your Home
Wait to Buy Big Ticket Items Until you Buy Your Home
Cashback Credit Card Capital One get $500 see Details
If you plan on purchasing a home wait until you buy it before buying big ticket items on credit because this can negatively affect your credit big time.
If you plan on purchasing a home wait until you buy it before buying big ticket items on credit because this can negatively affect your credit big time.
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