Your credit health impacts your financial well-being and ability to achieve long-term financial goals. By regularly checking your credit report and score, and increasing your financial literacy, you will know what areas to focus on to develop a strong credit profile.
Why Credit Reports and Scores Matter
A credit report compiles information that details your history managing debt accounts, such as credit cards and loans. It shows the opening date of each account, the credit limit or loan amount and monthly payment history for up to 10 years. Your payment history will reflect payments made on time, as well as those made 30, 60 or 90 days late. You will also find credit inquiries from lenders and other entities that requested to view your credit profile, any bankruptcies, and collection accounts.
If you have a history of taking out loans and using credit cards, you will likely have credit reports with all three major consumer credit bureaus: Experian, TransUnion and Equifax. Credit scoring companies FICO® and VantageScore® use the information in your credit report to calculate your credit score. Your credit score may influence your ability to:
So, you want to know what’s in your credit report and where your credit score stands to develop a strong credit profile.
>How Do You Get Your Credit Report and Score?
There are several ways to get your credit report and score for free. Visit AnnualCreditReport.com to get your credit report for free from all three credit bureaus. Experian also offers a free credit report and FICO® credit score to consumers. Credit card companies and lenders also will typically provide your credit score if you request it.
Credit scores can differ depending on the credit report a score is based on, and among banks and credit card companies that provide your score. But don’t be alarmed. Not all lenders report payments to all three bureaus, and scores are often calculated at different times. Plus, credit scoring companies FICO and VantageScore publish several variations of their credit scoring models. So, slight differences in your credit scores are likely—but generally will show a similar pattern of how you manage debt. If you practice sound credit management, such as making all your payments on time and keeping credit card balances low, you’ll likely have a strong credit profile. But if you don’t manage credit responsibly, your scores will reflect that as well.
What Is Considered Good Credit?
Knowing what’s in your credit report and where your credit score stands is just the first step. You’ll also want to understand the significance of good credit and how to build a good credit history, which will help boost your credit scores. FICO credit scores, used by 90% of top lenders, range from 300 to 850. Here’s how credit scores are categorized:
A good, very good or exceptional credit score can unlock the door to many opportunities and help you meet your financial goals. You’ll likely qualify for lower interest rates and better terms on credit cards and loans, such as a mortgage or auto loan. A healthy credit score can also help you access additional housing options, discounts on auto insurance premiums and waivers on security deposits for utilities. The bottom line? A good credit score can save you a substantial amount of money over time.
How to Improve Your Credit Score
You can improve your credit health by understanding what factors impact your credit score.
Here’s how your FICO Score is calculated:
If your score isn’t where you want it to be, follow these tips to help give it a boost:
You also want to ensure the information in your credit report is accurate. Review your credit reports from the three bureaus and contact your lender if you feel information has been reported incorrectly.
Take Control of Your Credit Health
Your credit reports and scores are important because they play a significant role in your ability to reach financial goals, such as buying a home. The first step in understanding credit is to check your own credit, to see how your financial decisions have impacted you. Once you see what has been impacting your credit, you can take steps to maintain and achieve healthy credit behaviors
(Partially reprinted from National Urban League — nul.org/blog)
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