5 Steps to Understanding Credit Scores

Posted by Steph Kaye on Monday, May 2nd, 2016 at 12:13pm.

Request copies of your credit report and verify that the information is correct.  

The only authorized online source you may utilize in order to request a free copy of your credit report is www.annualcreditreport.com. According to federal law, you may request one free copy every twelve  months from Transunion, Equifax, or Experian or you may complete the Annual Credit Report Request Form (PDF) and mail it to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281 or call 877-322-8228.  

Make sure your bills are paid no later than the date they are due.

On-time monthly payment of bills is one of the most important steps you can take in improving your credit score.  The establishment of automatic payment systems to be deducted straight from your checking account no later than two business days prior to the due date is a good way to ensure timely payment of your bills.  Be sure to maintain a high enough balance in your account to cover your monthly bills or consider opening an alternate account that is used specifically for the purpose of monthly bill payment in order to ensure you do not lack the appropriate funds to cover your monthly responsibilities.  

Do you know how credit scores are determined?

Credit scores are usualy determined by the following factors:

  • On-time payment of monthly bills.  Late payments, accounts which have been referred to a collection agency, and declared bankruptcy can both independently and collectively work to significantly lower your credit score.  All will show up in your credit history and can prevent you from securing a car loan, mortgage, and various other means of finances.  
  • Determine the amount of your outstanding debt.  The majority of scoring algoithms used in determining your credit standing are based largely on your total amount of outstanding debt when compared to your credit limits.  If your debt is racing to catch up with your credit limits, your credit score will be negatively impacted.  
  • Establish the length of your credit history.  Unfortunately, short credit histories do not bode well in affecting credit scores.  However, a short credit history may be offset when looking at other factors such as timely payment history and low balances.  
  • Recent credit application(s).  In the event that you have recently applied for too many lines of credit, perhaps you were overzealous with your number of credit card applications, you have likely adversly affected your credit score.  Inquires such as learning your credit score, credit  monitoring, and credit card corporations checking your credit in order to send you credit card offers are not considered applications for credit. 
  • The types and amouts of credit cards.  Other credit scoring algorithms look closely at the number and types of accounts you  have.  While a well balanced variety of installment loans and credit cards might actually improve your credit score, too many finance company accounts or multiple credit cards could work against you in hurting your total credit score.  

You can legally improve your credit score by consulting the Federal Trade Commission's information on disputing errors on credit reports, tips on dealing with debt, and more.

Learn how to sniff out credit-repair scams.

DIYing can be the best way to repair your credit score and the Federal Trade Commission's "Credit Repair: How to Help Yourself" explains the process and provides a list of legitimate resources for low-cost or no-cost help.

If you'd like to learn more, please don't hesitate to message Lang Premier Properties online or call us at 1-855-526-4466.

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