There are three simple steps you can take to improve your credit score. There
are well worth knowing and following because your credit score is one of most
important numbers you will carry through life. Yet that score will play a big role
in whether your application for a credit card, auto loan or mortgage is approved
and what your monthly payments will be. The higher your score, the lower
your interest rate and payments. Credit scores are used for lots of other things,
like setting car insurance premiums. The higher your score, the lower your
premiums. The difference between a high and low score can save you hundreds
of dollars a month. Your credit score is based on what banks, stores, utility
companies, credit cards, mortgage lenders and other creditors have reported
the three major credit rating agencies about how much you owe and how
diligently you have paid it back. There are no shortcuts to improving your score,
Yet that score will play a big role in whether your application for a credit card,
auto loan, or mortgage is approved and what your monthly payments will be.
The higher your score, the lower your interest rate and payments.
There are no shortcuts to improving your score. Pay all of your bills on time
have a lot going on in your life and bills get misplaced and writing checks is a pain.
But you need a system to get every bill to every creditor, before the due date on
your statement. Late payments, even to the gas or electric company, will be
reported to the credit agencies and result in a lower credit score. Pay down debts,
especially balances you've been carrying on credit or store charge cards. And that
means really paying them down to only having about 20% balance left of what
your credit line is with that business. Just transferring an outstanding balance from
credit card to another using one of those nifty promotions that came in the mail
will not help. Don't apply for credit on a whim. Your mailbox may be full of credit
card applications offering low, low rates for a few months. And cashiers often push
you to get a store charge card when you check out, tempting you with a
discount on your purchase if you'll just fill out their form. But if banks and stores
are constantly asking the credit agencies for your credit history, your score suffers.
Here's why, Your credit score is computed using a formula created by Bill
Fair and Earl Isaac. Nearly 50 years ago they figured out that if they could collect
enough information about a persons credit history, they could calculate how likely
that person would be to miss a payment or default on a loan. That risk factor is
represented by your credit score, or your FICO score as it is commonly called in
the credit biz. The higher the score, the lower the risk. While it is theoretically
possible to earn a perfect score of 850, but a score in the 700s is considered
good or excellent. If your FICO stands in the low-600s, however, you have
trouble. Your score is calculated using 22 different variables from your credit
history. About 35% of your score is based on how promptly you pay your bills.
The second most-important element is the amount that you owe. That accounts
for 30%. The number of years you have used credit counts for 15%. The types
of credit you use, ie. credit cards, store charge cards, installment loans, mortgages,
and so on, is worth 10%. That looks at how many accounts you have opened
recently and how many times companies have accessed your credit history. Take
special notice of one surprising thing that is not used to calculate your FICO score,
how much money you make. It doesn't matter whether you earn $10,000 or $10
million a year, income is not a factor. There is a FICO score on everyone who has a
credit file with any of the three national credit agencies, which accounts for 75%
percent of U.S. consumers over the age 17 -- about 165 million people. You're almost
certainly one of them if you've ever had a bankcard, store charge card, auto loan, or any
other kind of debt. A new federal rule requires the three big credit-reporting
agencies Experian, TransUnion and Equifax,to provide a free copy of your credit
history every year. you can order your free credit report at www.AnnualCreditReport.com.
If there are items on your credit report that are wrong or that you think are unfairly
reported, you can file a formal appeal with the credit-reporting agency. Each agency
has an appeals process that you can find by contacting them at the Web sites or
phone numbers listed below. Your credit report does not include your FICO score.
For that you have to either call one of the agencies or go to one of their Web sites,
and pay $10 or $15. Here's how to contact the three credit reporting agencies:
Equifax; (800) 685-1111, or www.equifax.com, Experian (888) 397-3742, or
www.experian.com, TransUnion, (800)888-4213, or www.transunion.com. If you
have credit problems it is very difficult to get items corrected on your credit report,
I suggest contacting Donna Giordano at Las Vegas Credit Repair 702-328-8515.
