Credit Info & Tips
Confused about credit reports, credit scores and more? We can help clarify a few of these wonders with some information below. Feel free to contact us anytime with any amount of questions!
CHOOSE YOUR PATH TO CREDIT KNOWLEDGE
THE CREDIT REPORT BREAKDOWN
Credit reports contain information about your bill payment history, loans, current debt, and other financial information. They show where you work and live and whether you've been sued, arrested, or filed for bankruptcy. All of this information is combined together in a credit report, helping lenders decide whether or not to extend you credit or approve a loan, and determine what interest rate they will charge you. It's important to check your credit report regularly to ensure that your personal information and financial accounts are being accurately reported and that no fraudulent accounts have been opened in your name. If you find errors on your credit report, you can take steps to have them corrected.
There are three major credit reporting agencies (CRA), Experian, TransUnion and Equifax each of these CRAs will then sell your credit report to creditors, employers, insurers, and others. These companies will use these reports to make decisions about extending credit, jobs, and insurance policies to you.
Having a good credit report means it will be easier for you to get loans and lower interest rates. Lower interest rates usually translate into smaller monthly payments. Nevertheless, newspapers, radio, TV, and the Internet are filled with ads for companies and services that promise to erase negative information on your credit report in exchange for a fee. Most of the negative items on your report will require time and concerted effort on your part in repaying your bills to make a difference. Many of the items that credit repair agencies can help you get removed from your credit report may reappear on your credit within only a few months.
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CREDIT SCORE SHOWDOWN
Credit scoring is a system creditors use to help determine whether to give you credit and how much to charge you for it. Information about you and your credit experiences, like your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts, is collected from your credit application and your credit report. A credit scoring system awards points for each factor. Your credit score helps predict how creditworthy you are; meaning, how likely it is that you will repay a loan and make the payments on time. Generally, consumers who have lower credit risks have higher credit scores.
You have three FICO scores, one from each of the three credit reporting agencies: (CRA), Experian, TransUnion and Equifax. Your 3 FICO scores affect both the amount of a loan and your interest rate that lenders will ultimately offer you. A FICO score is a three-digit number ranging from 300-850 and is calculated according to credit risk factors. These factors are represented in five categories. The weight of each category is represented by percentage (and subject to change without notice).
Amounts Owed (30% of score): What is owed on all accounts, on different types of accounts, whether you show a balance on certain types, how much of the total credit line is used, and a number of installment loans that are still owed.
Your Payment History (35% of score): Payment information, public records, and collections, late or missed payment details: how late, how much owed, how recent, and how many.
Length of Credit History (15% of score): How long your credit accounts have been established, in general, and how long it has been since you used certain accounts.
New Credit & Inquiries (10% of score): Types credit accounts you have, how many of each and the total number of accounts you have.
Types of credit (10% of score): Number of new accounts you have, how long it has been since you opened a new account and the number of recent requests for credit you have made.
It's important to make sure your credit report is accurate, because it can affect the accuracy of a credit score. You can have multiple credit scores, created by different companies or lenders that use their own credit scoring system.
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IMPROVING YOUR CREDIT REPORT & SCORE
You’re definitely not alone when it comes to wanting to improve your credit score. According to a 2014 study by the Urban Institute, about a third of Americans have some form of credit delinquencies. However, there is a light at the end of the tunnel for many potential home buyers. We find that more often than not, the gap to qualify for home financing isn’t too far out of reach. If you start now with these very basic credit management tips, you can begin to achieve a better credit future:
On Time Payments: Make payments on all your bills on time, every time. Can only make the minimum payment? That's absolutely ok!
Check Your Credit Report: It's important to check your credit report to see if there are any errors. It’s surprising how often a corrected error can close the gap to qualifying for a home loan or increasing your odds at a more appealing interest rate.
Avoid Applying For New Credit Inquiries: Put a stop to applying for new credit cards or lines of credit. The more you send in for a credit inquiry, the lower your score will go. Inquiries stay on your report for 2 years!
Payoff High Interest Rate Credit Cards: If you can, payoff those high interest rate credit cards. Most likely your hardly chipping away at your principle balance and throwing more money toward interest. Pay those off as soon as possible and watch your credit score rise!
If you are having problems paying your bills, contact your creditors immediately. Try to work out a modified payment plan with them that reduces your payments to a more manageable level. Don’t wait until your account has been turned over to a debt collector.
If you find errors on your credit report, write a letter disputing the errors and send it (along with supporting documentation) to the following: Experian, TransUnion and Equifax
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