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Whether you agree with the concept or not, your credit score and credit report are important factors when it comes to getting any type of a loan or credit card.
Your credit score is calculated using the data found on your credit report.
Credit scores were created to help banks and businesses make decisions about
you. A mathematical formula is used based on credit report data. The result is a
numerical rating. FICO scores range from a low of 300 to a high of 850. Mortgage
lenders consider a score of 760 and above as ideal. Most of the big banks,
credit card companies and auto loan lenders also use the FICO score. This is the factor that
determines your mortgage rate, auto loan rate and credit card terms.
While FICO score is the most widely used, it is not the only method by which scores
are calculated. The three major credit reporting bureaus -- TransUnion,
Experian and Equifax calculate the Vantage Score, which ranges from 501 to 990.
Repairing your credit is the next step after reducing or eliminating debt. Start
by finding where you stand, i.e. your credit score. You may have to pay to get an exact score. However to get an idea
of where you stand you can obtain a free copy your credit report once a year
from the 3 main credit bureaus: Equifax, Experian, and TransUnion. However you
have to pay to get your credit score from these bureaus. By law, you
have the right to get a free copy once each year. Other services will provide
you with
3 free credit scores if you signup for a trial credit monitoring and id
protection service. This may be worth it if you
suspect credit fraud or you are trying to improve your credit score or just want
unlimited access to your scores with alerts.
Once you have received your reports, examine them carefully. Look for any errors.
Make sure it is your credit history and not someone with the same name. Look at
your address. Someone with the same name and different addresses can cause
confusion. Also look of outdate information or signs of identify theft. Look for
delinquencies, strange or unrecognized items etc.
If you find errors, contact the appropriate credit bureau immediately.
To raise your score quickly (2 or 3 months), you should start paying your bills
on time, don't max out the available credit limit and payoff outstanding
balances. Leave the accounts open after they are paid off because lowering your
percentage of total available will raise your credit score (credit utilization).
Using credit cards wisely can build up a good credit history and contribute to a good score. If you are just starting, get a credit card and charge 1 item
a month or every couple of months but pay it off when the bill arrives. Don't
go overboard.
When getting out debt, keep in mind that some forms of debt relief such
asbankruptcy will lower your score.
Remember a higher credit score means a lower interest rate (APR) on your loan or credit card. This will save you money in the long run.
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