You can easily find out your credit score and after you do, you’ll understand the information available with lenders while evaluating your credit application.
Find out your credit score.
Knowing your credit score is the initial step for enhancing your credit, but many people shy away from this step. A recent survey showed that over ¾ of population they surveyed were ignorant about their credit scores within a 200-point range. ½ did not bother to check their score, and 17% hadn’t checked for quite some years.
Where to get this information?
Three major credit reporting agencies, Experian, Trans Union, and Equifax gather the information and use in computing your credit score. Nearly 35% of your credit score is affected by your payment history. Another 30% comprises your total amount. Of this revolving accounts carry more weight than installment loans 15% is affected by how long your credit history; and remaining portion that is nearly 10% comes from the percentage of new credit, and the mix of different types of credit you have.
How do others decide if your credit score is good?
Lenders and bankers use your credit score to guess if you will make timely payments of all your bills. Your credit score is calculated by a mathematical formula that shows the chances of a borrower defaulting in another 24 months. A FICO score usually lies between 300 to 850. A score over 750 is low risk while a score less than 620 is very risky. Every lender has their own cut-off scores below, which they will not lend. A credit report contains details of all of your credit transactions. When you first get your credit report, you may find it undecipherable as it contains numbers, abbreviations, and technical terms.
How to understand this report?
The credit report has 4 parts: a header for recognizing information, a section for credit history, another one for public records, and last one for inquiries. The header is quite simple to understand. Here you may find your name is spelled in various ways, and you may have been allotted more than one Social Security number. Do not panic as the system has been designed to handle any such changes. The second section detailing your credit history is also quite simple. At times, this section is also known as a ‘trade line.’ It contains your account number with every creditor, the type of credit, total loan amount, your outstanding balance, your minimum monthly payment, and the status of the account. “Charged-off” means the lender has tried to collect, and then written them off. The public records section is excellent when blank. It lists the bankruptcies, judgments, and tax liens that can have dramatic effect on your credit rating. Inquiries section lists the people who have expressed their interest in your credit report.
How to determine if your credit score is good or if it needs an overhaul?
Your credit score is calculated by a mathematical formula that uses data from all 4 parts of the credit report. It determines the chances of a borrower defaulting in the next 2 years. Consumer lenders and bankers resort to this score to judge the chances that you will honour your financial obligations. A FICO score is usually in the range of 300-850. A score above 750 is treated as good score while a number less than 620 is high risk. But it is up to every lender to determine whether to loan money or not to people whose scores lie within these numbers.
Does credit score monitoring harm my credit?
No. It is your right to go through your credit report, without affecting either your credit or your credit score. Your asking for your credit report is not the same as a lender asking for it. Your request is known as a ‘consumer pull’ and does not affect your credit in any way. Only when a prospective lender inquires, it can harm the score as it gives the impression that you want to use new credit.
Does credit score monitoring improve my credit?
No. But finding out your credit score will help you in being in control of your credit. Your credit report undergoes modifications over time, and your credit score will also vary. If you use a credit score monitoring service, you’ll understand if you are eligible for credit, and the rate you’ll get. If someone else has availed of credit in your name or you suspect that you are the victim of identity theft, credit score monitoring will allow you to know it fa