Improving Your Credit Score The Right Way
When you have taken some steps to clean up your finances, your credit score is bound to improve.
What you should do next is check your credit score. Don’t go overboard; don’t check it frequently. This can be a red flag to lenders. You only need to get a baseline, and then check again in about 6 to 9 months to see the progress. You can get free credit reports from different places. Always see to it though that you read the fine print, so you don’t sign up for something you have no idea about.
When you check your score, don’t just look at the number. See to it that you really go through the report. In many cases, you will find that there are many errors on the report. Such errors could cost you so much.
Look at the reports from all three credit bureaus (Experian, Equifax, and Transunion), and check every entry for accuracy. If you see a negative item on the report that is in any way inaccurate, you can file a dispute by writing a letter (not an email) to the credit bureau that logged the negative item with any documentation you have. The bureau will then investigate. Even a single negative item removed could make a remarkable difference in your score.
If you have a credit problem in the past that was supposed to be eliminated from your credit report but is still there without any reason why, you’ll need to notify the reporting bureau. These problems could be:
- Bankruptcy (should disappear after 10 years)
- Lawsuits (should disappear after seven years)
- Tax liens (should disappear after fifteen years)
If you think it’s enough, think again. Whatever cause you to have a poor credit score to begin with can easily do it to you again. Start over and get it right!
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Never pay for your Credit Score or FICO Score
Never pay for your credit report or credit score! Why pay for something that you can get for free?’
Yes you get to get your credit report from the three credit bureaus every year. Watch this video and learn more.
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Keeping a Student Loan Credit Score Friendly
Student loans can indeed affect your credit score. You can make it favorable to you, though. Here are some tips:
1. Always pay on time
Poor credit score is always bad news, even for students. Paying on time will show on your credit report and will yield a good payment history. If you’re a student that has a credit card and a student loan, they could actually be a plus to your credit score. They are telltale signs that you can handle your finances well.
2. Be in control of your credit card debt
It affects your credit score more remarkably than an actual loan, however it doesn’t imply that you should focus on it more than your student loan. Student debt doesn’t go away even if you file for bankruptcy in the future.
3. Communicate with your lenders
Inquire with your lenders if you feel you can’t keep up so that you can talk about how you can eventually get back on track with your loan. They could give you a 30-day or 60-day reprieve on your loan, so you need not worry about your payments in the short term.
4. Regularly check credit reports
This should be regularly done by college student so they are in the know of their payments and their loans. Know that some lenders do not give reports to all three credit bureaus and loan reports are not always the same. Be cautious with unauthorized purchases or loan approvals as well and make sure you refute them.
Prior to applying for a student loan, see to it that you can handle it well. It need not be a negative on your credit, given you know what to do to make it work for you-as a student and as a future college graduate.
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Benefits Of A High Credit Score
Upholding an excellent and responsible credit score is always of the essence. Otherwise, you will be running a huge risk of not being approved by the creditors.
You can refer to the Credit Score Rating Scale if you’re not sure what scores are considered high or low. When your credit score belongs to the higher side, even if it’s not in the 800’s, say, 720, there’s pretty much no need to try and raise it as lenders often categorize you with those of higher scores. The reason for this is because the risk of default on loans is basically low for individuals with credit scores this high.
If you have high scores, it follows that lenders will most probably give you very favorable rates. As a matter of fact, you can even ask for the best possible conditions there are. Having a score this good can almost assure you will be eligible even for big ticket items you are eyeing on. Lenders even let you borrow more than 80 percent of the value of your home without even requiring private mortgage insurance. You are seemingly going to get a home equity loan or line of credit with an interest rate equal to the prime rate, or even below it.
Having a good credit score does not only mean you are qualified to buy a house or a car, but it gets you on top with regard to employment, particularly with financial establishments. Truth be told, many companies these days only hire people with credit scores of at least 720. Credit scores are indicators of their work ethics, loyalty and their decision-making abilities.
Nevertheless, just because you haven’t borrowed any amount of money doesn’t mean you have a high credit score automatically since credit score is based on how you borrow. Let’s put it this way, if you don’t borrow, you cannot score well, there’s simply no basis. You borrow to establish credit.
The one thing we all need to have is discipline. Know your credit score and keep it high, or work on getting it high. You’ll never know what luxury you can get in having a high credit score.
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Does Misdemeanor Affect Credit Score?
When you borrow money, the lender will be reporting it to the credit bureau. Such information will be displayed in a 3 digit score. The bureaus don’t make public how they come up with these scores. However, they look into the amount the person owes, the repayment behavior, the duration of the person’s credit history, the different types of credit that the person uses, and the number of credit applications that the person has.
The lower your score, the riskier you come off to the lender. People with poor credit can be denied loans or lent money at sizable interest rates. On the other hand, those that have good credit standing are lent money more conveniently at a low interest rate.
A credit report will have the person’s name, date of birth, address, Social Security Number, driver license number and address. The employment will also be involved. Moreover, it will display the amount that one has borrowed and was able to repay in the past 7 years, liens and bankruptcies included. If you happen to have defaulted on a debt or missed a payment, it would reflect on the report.
A person’s income or savings will not reflect on the report, though. It would also not display your criminal record, religious beliefs, medical history or sexual orientation. That being said, a misdemeanor will not show on your credit report. It will only be displayed if a criminal background check is done. Any misdemeanor will always be shown in one’s criminal record, it can give you a hard time landing a job. Misdemeanors don’t have any bearing on one’s desire to get a mortgage or credit card, but it could pose a problem when he/she wants to rent a home.
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3 Credit Score Myths
The credit score a certain persona is indicative of his financial standing. Many agencies, on a regular basis, look at your credit score, from banks, credit unions, utility firms, landlords, insurers and even employers.
Myth 1
The Major Credit Bureaus Make Use Of Various Formulas In Coming Up With A Credit Score
This is considered to be the most common among all. Truth of the matter is, the major credit bureaus, from Experian, Equifax to TransUnion have a different term for the same score. TransUnion, say, calls it the Empirica, while Experian calls it the Experian/Honest Isaac Risk Model. They may have different names for the credit score, but they make use of the same formula in computing it. While the names used by the major credit companies are essentially the same, lenders often use just one credit report, to analyze your loan application.
Myth 2
Merely Paying Off All Your Debts Will Instantly Repair Your Credit Score
Your credit score will always be affected by your past credit history, and it’s not about your present debt. You can quickly pay off your credit card debts and settle any other outstanding obligations, but our previous history of late or missed payments will still reflect on your score.
Myth 3
Closing Old Accounts Helps Boost Your Credit Report
This is delusional. Closing old accounts will never have an impact on your credit score, but opening these old accounts will surely hurt your score. Having too many accounts also incurs damage to your credit score, because your score is typically affected by the difference between the available credit and the credit being used. Closing an old account will make your credit report look new, but the damage is done.
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Factors That Make Up Your Credit Score
Precise details of a FICO (Fair Isaac Corporation) score are never publicized. After having seen your score, do you wonder what factors credits scores are based on?
Being behind on payments always negatively affects your credit score. Payments that are received more than 30 days after due date is considered late. Majority of the creditors report all payments that are late and sort them out in different batches. So, if you are late even just for a day, there is a possibility that your account will be reported alongside those that are 59 days late. Yes, that can happen.
Your credit balance gives your lenders an idea of how much cash you have in hand and your credibility as a paying borrower. High balances create a negative impact on your credit score.
Don’t resort to opening several credit card accounts at a time as this may cause an issue with your lender. Because of such, you might be subjected for multiple credit inquiries since it will seem that you are strapped for cash, which isn’t doing any good to your credit score.
If your credit cards are maxed out, not only you will suffer but so will your credit score. Make sure that your balances are less than 35% of the available credit. It can sound pretty hard, but it’s totally achievable.
The longer your credit record is, the better it is for your rating. Have different kinds of credit card and never close down old ones as these will help you improve your score.
With a little more time and effort you can pretty much increase your score. Don’t let your credit score overwhelm you. You can always do something about it if you’re unsatisfied.
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How To Improve Your Credit Score
If you don’t have any idea what goes into your credit score, you can’t do much about it. If you know what elements go into coming up with it and how it is calculated makes it possible for you to have more control over your financial status.
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Is It Worth It To Work For Good Credit?
Dodging bad credit is a struggle people go through on a daily basis. They pay their bills on time by working their tails off. They hold out on their wants so as to pay interest on debt just to get good credit. This is a struggle to dodge bankruptcy or home foreclosure. However, is good credit really worth all the effort?
Countless households almost always pay off home mortgages that even exceed what they could sell their homes for in the market because of real estate bust. A lot of others are burdened by high interest credit card debt. Is it worth it just to get good credit? At what point do the benefits outweigh the struggles?
While the real estate market is dwindling, more and more are making the hard decisions to abandon their homes, downsize and let their banks foreclose.
Consumers are getting frustrated and ask what the benefits of their good credit are in the long run when the crisis has left many lending avenues depleted regardless of your credit score.
Your credit standing will display your financial reputation. Also, it will show the ethical concerns of walking away from your obligations. Loans and credit cards are accepted by individuals sans taking into what the future of their fortune holds. The advantages of good credit involve better financing terms, lower rates, easier payoff schedules and approvals for otherwise difficult loans.
The advantages alone can make your living costs more controllable. Nevertheless, would losing good credit benefits outweigh the relief you would be getting from relieving yourself of your huge debt?
There is always a chance that you could overcome, particularly when you become overburdened and your present debt burden seems hopeless. Bankruptcy and debt relief solutions that are built to help out in such situations must not be ruled out ever. Bad credit and the loss of good credit benefits will result, for a time, but in certain situations this can still be a sound financial decision.
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What Makes Up Your Credit Score
If you don’t have any idea what goes into your credit score, you can’t do much about it. If you know what elements go into coming up with it and how it is calculated makes it possible for you to have more control over your financial status.
1. The most significant part of your credit score will have your history of making payments as a basis. This accounts for 35% of your total credit score. Then, if you have an impeccable record of prompt payments, then this is actually good news. Nevertheless, if you always forget to pay a bill, then it would be otherwise.
2. Your blend of credit makes up 10% of your score. Having a mortgage, car loan, credit card and maybe a store account that you pay on is a sign to the agencies that you can handle different credit options. See to it that you can handle all of them, though, given that not paying on time on even one type can count against you.
3. 15% of your credit score will be determined depending on how long you have had a credit history. Certainly, the better you have handled that credit in the past years, the better it will be for your score. However, it would still be better to have a more established credit record than a shorter one.
4. Second in weight to your payment history will be the total amount of your debt. This factor makes up for 30% of your score. The debt you owe is compared to your income in what is called the “debt to income” ratio. The lower it is, the better. You must target keeping your total debt at 25% or less of your annual income to have the best effect on your rating.
5. New inquiries into your credit can be an indication that you may be overextending yourself and account for 10% of your total score. The one exception will be the case wherein you are the one looking at your credit report.
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