By: Arthur Cooper
Submitted: 2011-01-21 14:46:24 | Word Count: 664
Receiving a credit card, mortgage or loan is a privilege, not a right. When a lender considers giving you a loan, they need to know how likely it is that you will pay the loan back. To assess their risk, they will look at your credit scores. Understanding your credit scores is the first step in making your way towards good credit.
Every consumer has three main credit scores provided by each of the reporting agencies – Experian, TransUnion and Equifax. Each of your scores is based on your personal information and your financial history. As your information evolves, so does your credit score. Missing a payment will bring your score down, while making payments on time and adding good debt like a mortgage or student loans will bring your score up.
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The credit scoring system was created by a company called Fair Isaac Company, and your scores are generally referred to as FICO scores. Each of your scores from the three reporting agencies may be slightly different as they each compile different information.
Generally, your score will range from 300 to 850. Of course, the higher your score the better you fair when it comes to applying for a loan. You should aim for a score of around 720 or better. Those with credit scores above 720 have an easier time getting credit, and lower interest rates.
Finding out what your scores are
Getting your scores is a fairly easy process. Simply contact the three reporting agencies and request them. Or, go to www.annualcreditreport.com to get all your information in one place. The reporting agency’s websites are:
The thing that brings your credit score down the fastest is making payments late, or missing them all together. Make it a priority to pay your bills on time, and your credit score will slowly improve.
Another thing that helps is to pay down balances. Keeping your amount due to available debt ratio in check helps lenders see you are a low risk consumer.
Don’t open too many accounts. This makes lenders weary. Additionally, don’t leave any of your accounts alone for too long. A dormant card won’t contribute to improving your credit score, so try to revolve your cards.
Also, monitor your credit report for mistakes. Your financial history should be an accurate representation of your habits, and errors on it can negatively impact your overall score. Watch for open accounts you don’t recognize, late payments you made on time, and old information that shouldn’t be on your credit report any more. If you find a mistake, you must notify the reporting agency in writing. A company like Creditelves can help make this process a little easier. They will help you compile all of your information into a professional letter that will help the agency understand your situation and determine the appropriate course of action. Removing mistakes from your credit report will help your credit score immensely.
For more information on understanding credit scores, and how to improve yours, visit www.creditelves.com today.
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Click here to read the rest of Credit Scores. If you enjoyed this article, you also might like our other stories about Credit Dispute Letters.
