Credit Score
What then, you ask, is a credit score?
Your credit score is a mathematical compilation used to
see just how credit worthy you are based on past and
current credit accounts. Each credit reporting agency
has its own system on how to score your credit but the
scoring is basically the same. Creditors use the scores
( called FICO scores ) as a factor in deciding whether
or not to give you the credit you are asking for. The
lowest credit score is a 375 and the highest a 900.
Depending on your creditor’s requirements, you must have
a minimum of some FICO score to obtain credit through
that company. The higher your FICO score is, the better
chance you have to obtain credit because the risk to the
company extending your credit is low. The average FICO
score is between 620 and 650. Anything under a 620 will
mean that your creditor will consider you a
high-credit-risk and this could lead to your being
denied credit from the company. Credit may still be
obtained, but you might face higher interest rates or
even a long loan-processing requirement. The factors
that will make your FICO score fluctuate are your
payment history on past and current debts, public
records ( such as bankruptcy or negative accounts such
as collection accounts or repossession ), the
outstanding debt you currently have, how many inquires
have been made into your credit, the type of credit you
have, and your credit history itself.
A company may see that you owe too much right now, or
that your debt to income ratio is too high, for it to
offer you credit. From your score and your credit
report, you may have too many accounts with high
balances, too many new accounts, or you may have credit
that is simply inexistent – meaning that you have not
actually used a creditor that has reported to the credit
reporting agencies. Once you know your credit score and
have looked at your credit report, you can help yourself
to have better credit and a better credit rating with
the FICO score. Some ways to improve your score include
keeping the debt you have at a minimal level, paying
your bills on time, checking your credit report for
errors and having errors removed, and avoiding too many
inquires.
Once you have viewed your credit report, you can then
determine if there are errors. If you see something that
just doesn’t look right, you need to act immediately.
One of the most important and neglected rights that a
person has is not just to get a free copy of your credit
report, but to dispute items that are incorrect on your
credit report you receive. You should follow the
guidelines on the credit report you receive as to making
a dispute about an error or mistake on your report. Each
credit reporting agency will require that you follow
that agency’s guidelines in the removal of an error or
mistake on your credit report. Simply knowing your score
is not enough…you have to take action and correct
negative points on your credit report and correct the
errors, to improve your FICO credit score
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