Credit Consumer Score Information
Your credit score acts as an indicator of your level of financial responsibility. Understanding your credit score is key to keeping it in check so that you can get credit when you need it, whether it”s for credit cards, a mortgage or any other kind of loan. It may also play a role in other important factors in your life, such as renting a house or securing employment.
Your credit score is based on your credit history and includes issues such as whether you”ve paid your bills on time, the balances on your credit cards, the number of accounts you have, the age of your accounts and any collections requests that have been made. According to the Federal Trade Commission, creditors use this information to “[award] points for each factor that helps predict who is most likely to repay a debt.” Your credit score is the sum of those points, and it is an indicator to lenders about your ability to repay any loans you take out, and may be an indicator to other authorities about your level of financial responsibility.
Creditors, insurers and other businesses that use your credit score to determine if you are credit- or insurance-worthy have access to your score. Also, businesses that do background checks for landlords may look at your score to alert your landlord of any past problems you may have had paying rent. Your employer may see your credit score, but only if you give them explicit permission and written consent.
Credit scores from the three credit reporting bureaus range from 300 to 850. A credit score above 700 is considered very good, and those with a credit score in this range are likely to have an easier time obtaining credit. A credit score between 675 and 799 is considered good, while 620 to 675 is fair. Anyone with a score below 620 is considered a credit risk and may have difficulty obtaining new credit.
Obtaining Your Score
There are three credit reporting agencies: Experian, TransUnion and Equifax. You are entitled to one free credit report from each of these agencies per year. You may also request a credit report through the Federal government”s Annual Credit Report website. The Federal Trade Commission warns against using “imposter” websites that offer credit reporting services, as they are not part of the legally mandated free credit reporting program.
Improving Your Score
If you want to improve your credit score, start by paying all your bills on time. One way to make sure that you”re making on-time payments is by setting up automatic billing. It”s also important to start paying down your balances. Most financial experts agree that paying down the credit card with the highest interest rate should come first, since allowing a card with high interest to accrue over time is costly; however, others believe in the psychological benefits of the “snowball effect” in which people are inspired to pay their credit cards off once they see the effect of paying off the card with the smallest balance. Finally, only open new accounts when it is absolutely necessary to do so. Having lots of accounts with rotating credit will hurt your credit score. According to Craig Watts, a spokesperson for Fair Isaac Corporation, “A person who opens several accounts in a short period of time is statistically more likely to have problems repaying creditors.”