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Education Center
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 Actions to take so you can better understand credit |
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Initiating or Improving Your Credit
Improving your credit doesn't have to be complicated, but it does involve time, patience and persistence. Practice these guidelines and you're on your way:
- Be punctual with your bill paying.
Credit scores highlight your most current payment record. Paying on time increases your credit score. If you've been behind, start being more punctual with your payments!
- Pay no less than the minimum amount required.
You can always make additional payments - and it's wise if you can afford it. But you should by no means pay less than the minimum.
- Keep your credit card balances low.
Don't "max out" your credit cards - that can decrease your credit score.
- Don't apply for an excessive amount of loans or new accounts.
Applying for a lot of credit in a short period of time may concern lenders that you won't manage your debt well. Only apply for credit when necessary.
- If you currently don't have credit, get it.
Open a free or low-cost checking or savings account and make consistent deposits. Only write checks when you have money to pay for things. And apply for one or two credit cards, use them cautiously, and pay them off each month.
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Credit Reports
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Your credit report should correctly correspond to your credit history. From the instant you apply for a loan or a credit card, you begin your credit history. Credit-related transactions appear on your credit report, including your current debts, paid debts, and payment histories. Your credit report is assembled by three private companies: Equifax, Experian, and TransUnion. These companies sell your credit report to banks and other creditors to evaluate your past credit history.
Your credit report includes:
- An inventory of debts and a history of payment.
This can contain credit cards, car loans, and student loans.
- Any bills referred to a collection agency.
This can contain phone and medical bills.
- Public record information.
This can contain tax liens and bankruptcies.
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| How do you know what your credit looks like? |
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An inquiry is made when you apply for credit. Your credit report can also confirm if you were given credit based on the query.
Undesirable or derogatory credit information in your credit report is required to be removed after 7 years (bankruptcy-related information is required to be deleted after 10 years).
Your credit report is constantly updated. This is why you should know what it looks like at all times. In recent years, some dishonest creditors have not reported positive credit information on a timely basis. Make sure positive information is shown correctly, so checking your credit often is sensible. |
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Credit Scores
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A credit score is a solitary number that aids lenders and others determine how reliable you are in paying your debts. One common credit score is a FICO score. (FICO stands for Fair Isaac & Co. Credit, the company that produced the scoring technique.) FICO scores range from 300 to 850 points.
When you apply for a mortgage, your credit score is assessed. Your credit score may also be a feature used to determine the mortgage interest rate.
Your credit score is founded on several types of information which can be found in your credit report:
- Your payment history.
Overdue payments will reduce your credit score.
- The total debt you owe.
If your credit cards are at their limits, this can decrease your credit score - even if the amount you owe isn't large. Likewise, combining your debts onto one card can also reduce your score.
- How long you've used credit.
Your credit history is imperative. If you demonstrate a pattern of managing your credit sensibly, maintaining a low credit card balance, and paying your bills on time, your credit score will be affected positively.
- How often you apply for new credit and take on new debt.
If you've applied for several credit cards at the same time, your credit score can decrease.
- The types of credit you presently utilize.
This includes credit cards, retail accounts, installment loans, finance company accounts, and mortgages.
Your credit score is merely one factor in the credit verdict. Mortgage lenders also observe at your credit report, employment past, income, the amount of your income which is applied to pay debt, and the value of the home you want to buy.
Make sure you correct any mistakes on your credit report immediately. |
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Correcting Mistakes on Your Credit Report
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| If you see incorrect information on your credit report, it's possible to fix it. If you find things like misinformation about where you live and payments recorded as overdue when they were on time, you need to contact the credit bureau(s) immediately and contact the creditor who reported wrongly that the payment was late. They are required by law to scrutinize and correct mistakes.
This is what you can do:
- Complete a dispute form or write a letter to the credit bureau(s) and the appropriate creditors explaining what's incorrect.
For instance, if there's negative credit information older than 7 years or there's bankruptcy information older than 10 years on your report, it shouldn't be there. You should report it as incorrect information that should be removied from your report.
- Keep duplicates of the letters you send the credit bureau(s).
- Get written confirmation of the change in the credit account.
You should get written confirmation from the creditor and the credit bureau that your information will be updated.
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