These days, credit scores affect almost everything we do from the rates you will qualify for on mortgages, auto loans, and credit cards to the ability to get some jobs. That is why it is essential that we understand what a credit report is and what factors can affect it. It is also important to understand your credit score and how that number is viewed by lenders and others.
A credit report and score is a snapshot of how high of a credit risk you are to a lender. The most widely used credit score is the FICO, which ranges from 300-850. This system was created by the Fair Issac Corporation and is used by the majority of lenders in determining consumer credit scores. There are also many other credit rating agencies that sell "educational scores" that the industry sometimes refers to as "FAKOs" because they are not a true FICO score based on the Fair Isaac model. For example, Experian offers their own PLUS Score and TransUnion sells a Vantage Score, which ranges between 501-990. These scores can sometimes differ from the FICO score by 20 points or more and have completely different ranges, so it is very important that you know kind of score you are actually looking at and to make sure that it is consistent with the score your lender would use to qualify you for a loan.
Ultimately, it is recommended that you review your credit report at least once a year and determine what you can do to improve your score to ensure that you are not considered a high risk as a borrower. Depending on what is currently listed on your credit reports, improving your credit score could require paying down revolving accounts, establishing new lines of credit, or disputing inaccurate or misleading items on your credit reports.
If you are curious about what is listed on your credit report, visit www.annualcreditreport.com to order a free copy of your credit reports from each of the three major credit bureaus.
Credit Reports And Scores
As Americans, our credit history (and FICO score) is the single biggest indicator of how our financial futures will progress in the short term - much more so than any other financial indicator or ratio assigned to our financial lives. It is not surprising then with three national credit bureaus reporting, and the importance placed on a credit score in our society, that there are bound to be many misconceptions or “myths” surrounding the FICO score.If you are thinking about repairing your credit to improve your credit rating or perhaps retaining a credit repair service to perform this task for you, it might be helpful to know about some of these common myths first! These misconceptions are primarily about what can actually help a FICO score, and what may diminish or hurt a FICO score.Let’s clear up a few now!
The Myth:You have only one credit score.The Reality:There are three major reporting bureaus for credit, so there are three credit scores. The scores can vary significantly between the three, so it is advisable to check with all three bureaus.
The Myth:It will reduce or harm your credit score to check your own credit.The Reality: It should not impact your credit score no matter how many times YOU check. However, be sure to check through FICO.com or the three credit bureaus only.
The Myth:Income, gender and age are factors in a credit score.The Reality:Many a financial advisor will happily explain that this information has no bearing on a credit score. Employment is listed on the report, but does not have an effect on the credit score and is informational only.
The Myth:The higher the salary, the better (or higher) the FICO score.The Reality:Net worth and income are not factors used in determining the credit score. Winning the lottery, an inheritance, or increased compensation and earnings will not improve a credit score.
The Myth:You may dispute information that is unfavorable and it can be instantly erased.The Reality: Of course, you should dispute any item that is not accurate on your credit report. However, “questionable” credit repair services may make promises to erase unfavorable information from credit reports and instantly improve a credit score. Disputing credit report inaccuracies is a process which takes time and diligence.No unfavorable information becomes “immediately erased”.
The Myth: Searching for a loan damages a credit score.The Reality:Pre-approval or applying for a loan requires the potential lender to check credit worthiness, which will appear as an inquiry on your credit report. Although too many inquiries can reduce a credit score, searching for a car loan, home equity or mortgage won’t damage credit as long as these types of inquiries are made within 14 days or less of each other.If these inquiries are completed within that time frame, they count as “one inquiry” on the credit history.
The Myth:Offers for credit cards can hurt a credit score.The Reality:Solicitations for credit cards have absolutely no effect on a credit score.
The Myth:In marriage, credit scores or credit history are linked to one another.The Reality: Bad or good credit belong to an individual independently. However, if there are joint accounts, then this credit information and activity will be reflected on both individual’s credit reports.
If you are hoping to improve your credit score, which ultimately improves your credit worthiness, there are credit repair services that can assist you as well as “do it yourself” information available.Never underestimate the power of a high FICO score and a strong credit report.It is crucial for your long term financial health!
Both Anne Hammel & Liv Worthington are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Anne Hammel has sinced written about articles on various topics from Finances, Free Credit Report Score and Credit Repair Companies. Visit CreditRepair.com for more information about and check out the. Anne Hammel's top article generates over 8100 views. to your Favourites.
Liv Worthington has sinced written about articles on various topics from Dogs, Free Credit Report Score and Family. Liv Worthington has worked in the credit and debt management field for many years. She takes pride in helping all of her clients find the. If. Liv Worthington's top article generates over 8100 views. to your Favourites.
Community Property State Laws This article was written to give you a rough idea of what does and does not belong to you.DISCLAIMER The following in intended for reference only and not as legal advice
