What does my credit score mean?

| October 17, 2012 | 0 Comments

Credit Score
What does my credit score mean? For many, a credit score can mean a lot. A credit score can determine your ability to purchase a home, car or even get a job. Nowadays, a credit score plays a much larger part in our everyday lives which is why it’s critical that you are in control and aware of your score and how your daily decisions are effecting it. The term “credit score” is a numerical score that shows how worthy a person is for credit. The score is determined by taking your payment history, amount of time you have had credit, recent inquires and types of accounts. There are many factors that can influence your score, which is why it’s important you are in control and know what’s going on your credit report.

Your payment history is the factor that weighs the most when determining your credit score. It’s very simple; pay your bills on time. Depending on how late you are determines how many points you will drop. The thing about credit scores is that it’s so easy to drop, but ten times harder to increase. Next, they look at the length of your accounts and when you began to establish credit. The longer you’ve had good standing accounts, the better off you are. Did you know that every time you apply for a new credit card it may be reported to the agencies? That inquiry can stay on your report for up to two years. Applying for credit is not a bad thing, but applying for too much or too little can have major impacts on your score. Creditors and lending agencies want to see someone who has applied for credit in the past of course, but on the flip side seeing someone who applies for credit every two weeks can make lenders feel like you may be a risk. Next up, what type of accounts you currently have. Lenders want to see that you are able to keep up with different types of loans and forms of credit. It shows a diverse background and ability to juggle different types of interest rates, payment plans and payment lengths.

There are three major credit reporting bureaus that report activity; they are Transunion, Experian and Equifax. Creditors will report any activity to one or all of these reporters who will then place the information on your report. It’s important to understand that creditors decided what agency they report to, so your credit score can vary from agency to agency. This is really important to know if you are in the market for a house, car or other large purchase. The last thing you want is an unexpected surprise. You are entitled to one free copy every twelve months and it’s highly encouraged that you take advantage of this. If you find any items that are wrong, you have the opportunity to dispute the information and have it removed from your report. It’s important that you are always asking yourself the question, what does my credit score mean?

For more information please check out Credit Score Guide

Tags:

Category: Credit

Leave a Reply

?