Credit Score Central:
Learn all there is to know about understanding and improving your score
Who Cares About Your Credit Score?
Finally, you’ve found the perfect place to call your new home, and the property manager has told you that you should only fill some forms so that they can run a credit check. Regardless of your credit score, a credit check will make you feel a little uneasy.
Landlords and property managers are legally allowed to screen you as a potential renter by performing a credit check. However, you have to give your permission in writing. You give your landlord permission by signing a rental application, or they can ask you to sign a different credit screening document.
Are you thinking about buying your dream home or refinancing your mortgage? You probably know that your credit score will play a big role in getting you approved. Your credit score can either make or break your mortgage approval, and it is also a key determiner when it comes to the mortgage rates.
According to creditcards.com, homebuyers with a credit score above 760 can pay up to $2,500 less per year on a 30-year mortgage of $210,000 than those with a credit score of 620.
Savvy auto loan shoppers know the importance of checking their credit score before they visit a dealership. It’s always smart to have an idea of what car dealers will find after they check your credit profile. Car dealers will need to see your credit score to learn about your financial situation. This helps protect them from fraudulent shoppers. Your credit report verifies that you are who you say you are. Information in your credit report is also essential if you want to obtain financing.
Your credit report and history will give car dealers a better idea of whether you are a good candidate for an auto loan, and it can also influence the terms they offer you. Therefore, if you have poor credit, you should expect to get an auto loan with a higher interest rate than someone with a good credit score.
Employers may check credit before hiring to get more insight about a potential employee. They check for signs of financial distress that may point to a greater risk of fraud or theft. According to a recent survey by the National Association of Professional Background Screeners, 25 percent of HR professionals stated that they use results from credit checks when hiring for some positions. On the other hand, 6 percent of the participants stated they check the credit scores of all applicants.
In some cases, credit checks are necessary for some types of jobs that involve access to money, security clearance, confidential company data, or sensitive customer data. Potential employers won’t see your credit score or any of your account numbers, but they will see a more modified version of your credit report. The report omits some information that may violate equal employment–for instance, your marital status or birth year.
Best Ways to Getting Your Credit Score
You can access your credit report once per year from one of the three credit reporting agencies – Experian®, Equifax®, and TransUnion®. Additionally, you’re also entitled to access your credit report within a period of 60 days after your credit is denied, or if you’re unemployed, on welfare, or if your report is inaccurate.
It’s advisable to request a credit report from all the three reporting agencies and review them carefully. This is because one might contain inaccurate or inconsistent information. If you spot an error, file a dispute with the agency within the first 30 days after you receive your credit report. Apart from the three credit reporting agencies, you can also get your credit report from the following options:
Three official FICO scores in one place: MyFICO.com
If you want to get a more complete look at your credit, visit MyFICO.com and get your FICO Scores along with your credit reports from the three major credit bureaus for just $19.95 for each bureau and $47.85 to get your credit report from all three bureaus.
Free daily credit-score updates: WalletHub.com
WalletHub is the only service that offers daily credit reports for free. While the contents of your credit score won’t change on a daily basis, WalletHub helps you monitor any significant changes. This will help you avoid making important financial decisions that are based on outdated credit score information.
WalletHub also has a free iPhone and Android app that you can easily download to your mobile device. This means you can access your credit score information for free wherever you are as long as you have internet connectivity.
Monthly Experian FICO Score: Discover Credit Scorecard
Whether you’re a Discover customer or not, you can sign up for a free monthly Experian FICO credit score in just a few steps. Discover even shows you what is helping and hurting your score.
Monthly Equifax FICO Score: Citi Credit Card Holders
If you are a Citi credit card holder, then you can get your FICO score absolutely free. However, the scores are only based on Equifax® credit report. The good thing is that the credit reports are updated on a monthly basis. To obtain your FICO score, just login here with your account credentials.
Weekly credit-scores from two agencies: CreditKarma.com
Credit Karma isn’t a credit reporting agency or a credit bureau, but it offers absolutely free weekly credit reports from two major credit bureaus – Equifax and TransUnion. Credit Karma pulls your credit score information from these consumer credit bureaus and offers free tips and tools to help you in making an informed decision. To receive your free weekly credit score, you will have to create a Credit Karma account, which is also free.
Credit Score, Credit Report, Credit History: The Difference
A credit score is a three-digit number that determines and tells whether you are likely to repay your debts, manage loans, lines of credit as well as other financial obligations over the years. Your credit score is built on your credit history. A credit score is simply your credit history expressed in numbers. Credit scores are crucial since they have a great impact on your ability to borrow money and also affect the cost of borrowing.
There are many types of credit scores; however, there are two main types that are mostly used by lenders to evaluate loan applications, FICO Scores, and Vantage Scores. FICO Scores are the most commonly used type of credit score, and they range from 300 to 850. A good credit score is essential to your financial well-being. Additionally, there are two types of credit scores: the generic score and the custom scores. Credit bureaus can calculate your credit scores based on their proprietary models.
A credit report is a statement that contains significant information about all your credit activities and current credit status, for instance, loan paying history and your credit accounts statuses. Lenders use the information on your credit report to make decisions about permitting credit, verify identities and other reasons defined by the federal law. Credit reports are necessary since they form the basis of your credit scores. If your credit score contains a long list of debts paid on time, it will result in a positive credit score, which will help you in getting loans on favorable terms.
All the information contained on your credit report comes from credit reporting agencies, financial institutions and other entities that you conduct business with. You can request your credit reports from the major credit reporting bureaus; Equifax, TransUnion and Experian three months before making a large purchase like buying a home or college financing.
Your credit history is a record of your ability to pay debts on time as well as your responsibility in paying debts. Lenders use your credit history to decide whether to offer a new line of credit or not. Other people who use your credit history are employers, often to assess potential job candidates. Landlords also use it to evaluate potential renters. The information contained on your credit history is used to calculate your FICO score; a higher FICO score means better creditworthiness.
Q&A: Your Credit History
Your credit history is the main component of your credit reports. It is always a good idea to regularly request your credit reports and track any changes as well as correct any errors.
What all is included in my official credit history?
Your credit history will contain five important types of information
- Payment history; your payment history greatly determines your credit score. This is a record of account statuses, like paid, past and due payments. Missed payments stay on your credit history for many years.
- Credit utilization; includes details of your existing mortgages and loans.
- Length of credit history
- Credit mix
- New credit
- Credit inquiries
- Public records
- Closed accounts
What are the penalties if I miss a payment?
Timely payments greatly affect your credit scores, so does a missed payment. A missed payment can be a result of a financial emergency, a simple oversight, or even a lost job. Your credit score will drop as a result of a missed payment. Since lenders use your credit to gauge your risk as a borrower, a missed payment will suggest that you are a risky borrower. If you have missed a payment for over 30 days, your lender will report you to the credit reporting agencies which will lead to the missed payment showing up on your credit report.
Missed payments are listed on your credit history depending on the duration of the missed payments. A late payment is always evaluated depending on the degree of severity and how frequent you’ve paid late. One missed payment could stay on your credit history for up to seven years, and if missing payments becomes your habit, you will be charged off or even sent to collections which could really hurt your credit score.
What other things could affect my score?
- Private liens
- Closed cards with remaining balances
- Too many credit requests
- Ignoring possible inaccuracies
- Applying for more credit
- Ignoring your credit reports
- Changes in your credit mix
How to quickly improve my credit score?
The best way to improve and rebuild your credit score is to manage it responsibly over time. Ignoring the possible inaccuracies in your credit report can lead to a drop in your credit score. Improve your credit score by eliminating errors like payments that are marked late, whereas you paid on time, or even remove negative information that is too old. The other way to improve your credit score is to stay well under your credit limit. You can do this by making small monthly payments to keep balances down, ask for a credit limit increase and tackle the balances on cards with the highest utilization first.
10% of your credit score is determined by your credit mix: car loans, mortgage, student loans, and credit cards. Diversify your accounts by adding another element to your current mix and make timely payments to improve your credit score. Keep unused credit cards open, as long as they don’t cost you an annual fee. Owing the same amount and having few accounts might lower your credit score.
Do student loans harm my credit?
A student loan can affect your credit either positively or negatively depending on your payment practices. Timely payment of student loans can help you increase your credit score. Your payment history is significant in credit scores. Missing a student loan payment is similar to missing a payment on any other type of debt. Therefore, make at least the minimum payments on time and build your credit score positively.
Can a lender turn me down due to a bad credit history?
Lenders can discriminate against you because of your bad credit history. Being turned down for a personal loan can be a blow. Credit discrimination prevents people from having access to a better future. A bad credit history greatly impacts your ability to get loans. Lenders also use your credit history to determine the rate they should provide. You can easily be turned away because of poor credit history.
Additionally, getting credit should be based only on legal factors like debt, income, credit history and your expenses. It should never be based on arbitrary factors like religion, sex, race, as well as other personal factors. The Equal Credit Opportunity Act forbids creditors to discriminate against borrowers based on personal and arbitrary factors.
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