Understanding Your Credit Score
Understanding Your Credit Score
A higher score is better and allows you to qualify easier for loans and lower interest rates. Scores usually range from 300 – 850 and there are different credit score models based on the type of credit.
How many scores do I have?
- There are 3 credit bureaus and your information is often different between bureaus. Lenders usually use the middle score as your qualifying score.
What affects my scores:
- Many items can impact credit scores.
- How long you have had credit.
- On-time payments versus any late payments.
- The amount of available credit used (less is better)
- Are you over the credit limits? (not good)
- Late payments
- Recent late payments hurt your score
- Older late payments have less impact
- Derogatory credit will hurt scores but they lessen over time
Recommended steps to increase my score?
- Always make sure you pay bills on time. Late payments hurt scores.
- Do not max out credit cards or get near the limits. Balances of 30% or less of the credit limit increase scores.
- Longer your credit history – the better
- Do not close old accounts. Better to keep the account open with $0 balance.
- Do not apply & open too many accounts. Just a few accounts, paid on time, with low balances is better than too many accounts.
How can I see my credit?
- You are allowed 1 free credit report each year from the main 3 credit bureaus.
- Go to AnnualCreditReport.com or call 877-322-8228.
How do I correct mistakes?
- First, contact the creditor and explain what is wrong and why. Try to have documentation to support the correction.
- If creditor will not correct, you can file a dispute with the credit bureau to correct.
- If applying for a home mortgage, talk to your loan officer before filing a dispute. For mortgage approval, some disputes must be resolved or removed. Best to speak with your loan officer before submitting a dispute since some errors are minor and may not affect your approval.
