All About Credit Scoring
Credit scores and those who manage them are the basis for all things pertaining to credit. Whether it's a loan or just a basic purchase with a credit card, your credit score will be ever changing. For the average consumer, it's not of much interest how or why a credit score is put together, but simply that they can swipe their credit card or be approved for a line of credit whenever need be. The unfortunate reality is without a firm understanding of credit scoring, these luxuries can quickly become a thing of the past. A credit score destroyed by irresponsibility or fraud can leave those affected wondering what happened and what they can do to fix such a mess. Fortunately though, it's never too late to learn about credit scoring and how it can affect your life both financially and emotionally.
What comprises a credit score? A myriad of things can raise or lower your score but the bulk of your score is a lot of timely payments. Nothing can raise your credit score more than consistently paying off your debts on time. On the other hand, nothing can hurt your score more than missing payments. It's important to remember that it will take a lot more reliable payments to make up for just one missed payment so try to avoid it at all costs. Along with a detailed history of payments, things like the amount of credit used can effectively boost your score. It's important to make sure there is a long history, because without one, it's difficult for creditors to accurately determine your score and that will unfortunately lower it. A great remedy for this is to take the cash you have available and set it aside; then purchase things such as groceries and gas on credit and use your cash to pay off the card at the end of the month. Doing this will keep you out of debt but give you a quick and easy way to build up a credit history, thus increasing your credit score.
Credit scoring is performed by three different agencies, Experian, Transunion and Equifax. In the United States, credit scores are a number somewhere between three hundred and eight hundred and fifty, with the higher the score the better. You're entitled to one free credit report a year, although that means one report from each of the three agencies. While you may ask for your free annual credit report for these agencies all at once, it is much more helpful to ask for them independently with 4 month gaps in between. This will allow you to keep a good eye on your history for any sort of fraud and will allow you to better gauge what you are doing right and what you are doing wrong in terms of improving your credit score.
One of the most disastrous thing that can come up while the credit agencies calculate your credit score is fraud. It takes but an instance for your credit score to plumate hundreds of points from a single event. While it is possible to work with the credit agency to try to remove the fraud and repair your credit, it can take dozens of hours and nothing will fully repair it to what it once was. This is why checking your credit score often through your free annual reports or through various creditors is the first and most potent weapon against fraud. Prevention is much more effective than reactions when it comes to credit fraud. Whether you choose to be informed about it or not, your credit score will follow you and influence your financial life forever, it's best to be prepared and have the tools and knowledge to tackle any endeavors that come along.
Credit Scoring
|