Credit Report Score: Its Relation to Your Creditworthiness |
|
Many Americans could use a primer on credit and the significance of the credit report score. Are you aware of how creditors determine the creditworthiness of loan and credit card applicants? If you do have an idea what your credit report score is, do you know how to improve it? Or even if it needs improving? These questions and many more can be answered by this quick primer, or by some research at websites like FTC.gov, the websites of the Consumer Federation of America or FairIsaac.com. What is important for most Americans to know is this: your credit report score is used by many organizations nowadays to determine your suitability for things such as insurance, credit cards, mortgage loans, even home rentals or job applications and the availability of utilities with low deposit requirements. So it benefits you to not only know what the score is, but to pump it up as much as you possibly can. Your credit report score (sometimes called FICO score) is a 3-digit number that ranges from 500 at the low end to over 800 at the high end. The number is derived from various components such as overall debt load versus income, bill payments to your creditors, public records (judgments, collections, foreclosures and bankruptcies), and handling of credit card debt, such as how high your balances are allowed to run and whether you pay minimum payments. In general, though it seems obvious (but is sometimes difficult in practice) you should maintain low balances on your credit cards, and keep up a program of paying them off, rather than just servicing them monthly ad infinitum. For one thing, credit card debt is generally among the highest cost debts you can get, and so is not usually a good deal to maintain for long term if it's at all possible to avoid. Credit card debt depends on Americans cultural dependence on convenience as opposed to low cost. For another thing, credit card balances that are too close to their limits have a negative impact on your credit report score. The use of these distilled numerical indicators of a person's creditworthiness has enhanced businesses ability to make quicker decisions on granting credit and other services. But it has also allowed incorrect information to have a bigger impact in that, consumers who don't know much about their credit report scores could lose out on credit and other services they should b getting. Therefore it is important for Americans to become informed consumers and keep track of changes in their credit reports to ensure that no incorrect information has an impact on their creditworthiness. Remember that each and every time you request credit, or each time you are investigated, an inquiry goes against your record. Too many inquiries can have a negative impact on your credit report score. So you should attempt to control the number of inquiries on your record. Don't close accounts that you are close to paying off. Having fully paid accounts on your record is a positive item, even if the balance is zero, and there is no need to close the accounts. Keep an eye on your budget to make sure your overall credit card debt and loan debt is well within your means, so that you can maintain a program of paying off your debts on time or early. This will help ensure your credit report score constantly improves. Should you decide to take on debt, carefully select your lender, and go in armed with the information in your credit report from the beginning. Knowledge of your credit report score can help you to work with your potential lender from a position of strength and knowledge. You can thereby explain what circumstances led to what is contained in your credit report, and if there are negative item in it, make it clear that they won't have an effect on your repayment of this new debt. In this way you can continue with your program of building a strong credit rating. |
