|
|
|
Once you understand how much your credit can impact your financial future, it's likely that you will want to do everything you can to improve your credit score. How much you pay on home loans or refinances, auto loans, insurance, credit cards, and many other areas are directly affected by your credit score. The very words repair or fix credit suggests that you can repair your credit just as you would repair your car. Or, that you can pay money to a company that will somehow "engineer" a high credit score for you.
Here's some good news for you: You don't need to shop around for a credit repair company, just look in the mirror and hire yourself, for free. You'll save a lot of money, and you'll know for the rest of your life how to manage and protect your own credit, which is the way it should be.
Information on your credit history will be contained in three separate credit reports from each of the credit bureaus: Equifax, TransUnion, and Experian. It's important to check and monitor all three of your credit reports because the information in each report may vary. Why? Because different creditors may report your credit account and payment information to separate bureaus, and companies checking your credit may only use one of the three credit bureaus.
You should review all the information in your credit reports to make sure everything is accurate, because any discrepancy could affect your credit score, or be an indication that you have become a victim of identity theft. Here's how the information in your credit report is "weighted" to determine your credit score:
Your Payment History accounts for roughly 35% of your overall score. This category includes account payment information on credit cards, retail or department store cards, installment loans, mortgages, finance companies and more. Lenders want to know how many of these accounts are being paid as agreed or are past due. How long has it been since there are delinquent (or overdue) items? Do you have any public records including bankruptcies, liens, judgments, suits, wage garnishments, or collection items in your files? Lenders want to see a consistent record of paying as promised. Paying your bills on time is the number one way you can help improve your credit score.
Your "Amounts Owed" accounts for roughly 30% of your overall score. This includes the amount of money you owe on specific accounts, the number of accounts you have with balances, your debt-to-credit ratio (or what proportion of your total credit limit is currently being used), and your installment loan ratio, or the proportion of balance to the original loan amount. Higher credit ratings are achieved by those who have substantial credit available to them, and maintain relatively low balances.
Your "Length of Credit History" accounts for about 15% of your score. This includes the length of time since your accounts have been opened, by specific account category, and it includes the time span since credit activity is recorded.
Your "Amount of New Credit" accounts for roughly 10% of your score. For instance, how many recently opened accounts do you have, how many accounts by category, how many of these accounts are delinquent, how long has it been since record of delinquency, and if you have had credit glitches, have you re-established a positive credit pattern since problems occurred?
The "Type of Credit Used" accounts for approximately 10% of your score. This category looks at what kind of credit accounts you have (credit cards, department store charge cards, installment loans, mortgages, finance company accounts, etc.), as well as the specific number of accounts in each category and any recent information available on those accounts. Generally, creditors like to see a healthy balance of credit used and not an over-reliance on credit cards.
Knowing how each section of your credit report is "weighted" can help you take positive steps to improve your credit score.
Walter Burch is the Editor-In-Chief of CreditLearningCenter.com, a website that provides information, as well as audio and video resources to help consumers understand, manage, and protect personal credit. Get Your Credit Score, Credit Report and 3-Bureau Credit Monitoring Free for 30 Days!
Take the Next Step
Share your thoughts about this article with the editor: Click Here
Sign up for our free eNewsletter Dollar Stretcher Tips.
Looking for an answer to a frugal living question? Click here to ask a Dollar Stretcher Stretchpert!
To subscribe, check the newsletters you wish to receive, enter your email address and then click Subscribe.
Each month one TDS reader will win $100 just for telling us your favorite time or money saving idea. It could be you!
Click here to share your idea.
Recent winners are:
- Michelle from NC
- Matt from CO
- Joan from CT
- Joanne in New York
|
Money problems? Struggling with credit card debt? What you need to know about bankruptcy? Trouble repaying student loans?
|
Copyright 1996 - 2012 "The Dollar Stretcher, Inc." All rights reserved unless specifically noted.
Contact the Dollar Stretcher at:
Dollar Stretcher
PO Box 14160
Bradenton FL 34280
Voice 941-761-7805
Fax 941-761-8301
"The Dollar Stretcher, Inc." does not assume responsibility for advice given. All advice should be weighed against your own abilities and circumstances and applied accordingly. It is up to the reader to determine if advice is safe and suitable for their own situation.
| About Us | Privacy Policy | Writer's Guidelines | Sponsorship | Media | Contact Us |
Dollar Stretcher Community
Forums
Blogs
Also In This Week's Issue
In The Dollar Stretcher Community
Reader Favorites
Newsletters
Email
Print
Contact Editor
RSS Feed
Share
Leave a Comment
