Understanding Credit
Understanding Credit
What are Credit Scores?
A credit score is a number that is calculated based on your
credit history to aid lenders in determining your
credit-worthiness. This number is intended to help a lender
ascertain the level of risk they may be taking in loaning you
money. The system awards points based on information in your
credit report. Lenders can predict how likely someone is to
repay a loan and make payments on time.
What Can I Do to Improve My Score?
* To get the best credit score, you need a mix of different
credit types including revolving accounts (credit cards, lines
of credit) and installment accounts (auto loans, personal loans,
mortgages).
* Reduce your balances on credit cards to 75% or less of your
available credit. Don't charge more than you can pay off in a
month. You don't have to pay interest on a credit card to get a
good credit score, and it's a smart financial habit to pay off
your credit cards in full each month.
* Pay your bills on time. (This is probably the most important
of all!)
* If you don't already have established credit or you need to
rebuild, get a secured credit card. Secured credit cards report
your credit payment history information to the credit bureaus
just like a regular credit card. They are "secured" by your
money. Check with your personal banker.
Avoiding over-inquiries
There are two types of credit inquiries that can be made to your
credit report: hard inquiries and soft inquiries.
A hard inquiry occurs when you seek to obtain credit. This
happens when you apply for a loan or credit card, for example.
Each time you fill out a credit card application at a department
store, the inquiry counts as a hard inquiry. Only you can
authorize a creditor to perform a hard inquiry on your credit
report.
A prospective lender or other creditor will likely be concerned
with an applicant whose credit report shows a high volume of
hard inquiries. That's because it suggests a carefree attitude
in applying for credit or an effort to borrow excessively.
Borrowing too much -- a situation called over-leveraging -- is a
potential red flag for creditors. It signals you may face more
difficulty in repaying your debts in cash-strapped times than a
person who judiciously applies for credit.
If you're going to ping your credit report with frequent hard
inquiries, it may be best to concentrate them around the time
you apply for a home or auto loan. If you're thinking about
applying for a mortgage loan, please contact me for advice and
information before starting.
A soft inquiry is one where the inquiry is not tallied on your
credit report. A soft inquiry does not constitute a bona fide
request for credit. For example, a soft inquiry occurs when you
obtain a copy of your report.
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------------------------------------- There is no fast and easy
way to repair damaged credit that took months or years to occur.
The law allows negative information to appear on an individual's
credit record from seven to 10 years.
Get a copy of your credit report. If you are being turned down
for credit you need to be sure the reason is valid. Many credit
reports have errors. Dispute any inaccuracies you find.
Get a credit report from all three bureaus. Each one may have
different information and maybe errors in your file. You can't
know which bureau's data will be used to evaluate your credit
application, so check them all.
Addresses / phone numbers of the three major credit bureaus:
........ Equifax (CBI) PO Box 740249 Atlanta, GA 30374 (800)
685-1111 ........ Experian (TRW) (888) 397-3742 ........
Trans-Union 555 W. Adams Chicago, IL 60661 (800) 916-8800 (312)
466-8385
http://www.youshouldown.com