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What is a credit score?
A credit score summarizes your entire credit report information
into one number. This number is calculated by a mathematical equation
that evaluates many types of information from your credit report
at that particular credit reporting agency. By comparing this information
to the patterns in thousands of past credit reports, scoring identifies
your level of credit risk. Your score tells a lender how likely
you are to repay a loan, or make credit payments on time. The higher
your score is, the better chance you have of getting the credit
you apply for.
What is a consolidated score?
A consolidated credit score summarizes your entire credit picture,
including your information from all three credit reporting agencies,
at one glance. Your score is calculated using score
factors from your merged 3-bureau credit report to get a quick snapshot
of where you rate with all three credit reporting agencies.
How is it used?
Credit scores are one of the main tools creditors, employers, insurance
and finance companies rely on to determine your creditworthiness.
Your score is a quick snapshot that is often used when credit decisions
are made quickly. Creditors may also obtain your full credit report,
to access more detailed information to aide their decision on your
level of risk.
How is my credit score calculated?
A credit score summarizes your entire credit report information
into one number. This number is calculated by a mathematical equation
that evaluates many types of information (score factors) from your
credit report at that particular credit reporting agency. There
are many types of score factors that can have a positive or negative
affect on your score. The factors are listed in order of the degree
to which they affect your score negatively, meaning that the factor
listed first is what most decreased your score. Some examples of
score factors include but are not limited to:
- Too many inquiries (how often you apply for credit)
- Too many serious delinquencies (how timely your account payments
are)
- Too many recently opened accounts (how often you have opened
new lines of credit recently. )
- Average balance of revolving accounts is too high (what you
owe vs. available)
- Too few mortgage accounts (what types of credit do you use)
Credit reporting agencies use many types of credit scores to evaluate
risk for different types of credit. Mortgage lenders may use one
type of score while auto dealers and credit card issuers would use
other types of scores offered by the credit reporting agencies or
that they have developed for their own purposes.
Monitoring and improving your credit score
Your credit file is constantly changing every time new information
is submitted from creditors. It's important to be proactive and
monitor it to improve or maintain your credit score.
To improve your overall credit standing there are several positive
steps you can take:
- First, know what's on your 3-Bureau credit report,
detailing your credit history from each of the national credit
reporting agencies. Monitoring your credit file will help you
understand the information behind your credit score.
- Check for inaccuracies on your credit report. Be sure to examine
your files from all three bureaus, as the information may not
be the same on each one. If you find errors, take steps to dispute
the information in order to remove it from your file.
- If you are having difficulty paying your bills, develop a plan
now. Make a list of everyone you owe money to and how much you
owe. Contact your creditors and discuss payment options. Begin
now to catch up with late payments.
- Consolidate bills with a balance transfer to another credit
card with a lower interest rate and also eliminate three or four
other credit card accounts you currently have.
- Identify ways you can decrease your spending and increase your
income. Ask a friend or family member to help you come up with
a realistic budget that will help you catch up with late payments.
- Finally, don't use credit cards until you are in a financial
position to use them responsibly again.
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