Credit Scores: What You Need to Know
Credit scores are oftentimes a topic of confusion. You have probably seen advertisements for free credit scores online and on the television. Maybe you have even thought about getting a copy of your credit bureau scores. But once you have it, will you understand it? Do you know what high and low credit scores are? Before you get a copy of your credit scores ratings, make sure you know a little about what they mean for your personal finances.What Credit Scores Mean
A credit score is simply a number assigned to you as a consumer based on how good or bad of a credit risk you are. It is based on your past credit history. If you have no credit history, you will have a low score. If you have some credit history and have paid your bills on time each month, you will have a high credit score. If you have lots of bills that are late and behind the payment schedule, you will probably have a low score. The amount of your debt is also included in the scoring.When you attempt to get a loan or credit card, the lender will look at your credit rating scores. If you have low credit scores, you will not get the loan, or you will get it with a high interest rate. So, knowing your credit bureau scores before applying for credit is important.
Consider How You Got in Trouble
As you start working towards repairing your credit score, think about how you got into trouble in the first place. Did you overspend? Did you fail to make payments on some accounts? Do you have past due accounts? Make a list of your problems to refer to as you make your plan.If you are overspending, this is the first problem to fix. Create a budget that will allow you to spend less than what you make. If you can't, then you need to find a way to make more money, either through a part time job or through working from home in some fashion.
However, before you panic thinking that there is no way you can make more money, make sure that you are not spending money on things that you do not truly need. You do not truly need a cappuccino in the morning because you can make coffee for yourself at home. Think about some of these extras that you can cut to free up money to work on repairing your credit score.
Getting a Copy of Your Credit Score
Before you start looking for a copy of your credit score, you need to know that you actually have three credit scores. There are three credit reporting bureaus, Experian, Equifax, and TransUnion. Each of these may have slightly different information about your credit history. This happens because your creditors are not required to report information to all three agencies. For this reason, you need to get a copy of all three credit scores.You are entitled to a free credit report each year from each agency. However, this does not include a score. If you want to get free credit scores, you will need to find a service that offers a free score as part of a package. You will pay a little for the service, but you will get your score for free. Otherwise, you can purchase a copy of your score from each of the agencies. Unless you really understand how credit scores are figured, purchasing a copy of your score is probably a good idea before applying for credit.
Understanding Your Credit Score
Credit bureau scores are represented as a number between 300 and 850. This is known as a FICO score. A FICO score of 850 is considered perfect. Anything above 650 is considered a decent score. The higher the score, the better the situation will be for you as a consumer. The average credit score in the United States is 723.What to Do if You Find Mistakes on Your Credit Score
You may get a copy of your credit score and find that it has mistakes on it. Fixing these mistakes is important. If there is a mistake on your score, it can affect your ability to get credit.How do mistakes happen? Sometimes people will apply for loans under a nickname. If that nickname happens to be your name, the loan could get filed incorrectly. Another way that a mistake could appear is if someone makes a mistake when filling out the application. Sometimes a number transcribed or a word spelled wrong can cause the error.
Another way that errors can show up is if someone has stolen your identity and used your Social Security number to apply for a loan or Australian Credit cards. This can even happen if someone misreads the Social Security number on the application, writing down yours instead of the applicant's. While mistakes may not be avoidable, they can be fixed.
To fix a mistake on your credit bureau scores, you will need to dispute the error in writing. The credit bureau is required by law to investigate the dispute within 30 days after receiving your request. You will need to be able to prove that it is an error with financial documents. Be sure that you specifically request that the error is removed and keep copies of all of your correspondence with the bureau. Repeat this process with the lender in question. If there really is an error, this should remove it, and your credit rating scores will increase.
Credit scores are important financial tools. With them, lenders can give approval or denial for loans much faster. You can use your credit bureau scores to know the health of your finances. While you may not be able to find free credit scores, you can get a copy for very little cost, and you should do this on a regular basis. Knowing your credit score is the key to knowing your financial stability. ll once again enjoy a good credit rating!
