The knowledge and understanding of credit score and credit reports is important for everyone. The credit score determines if you are eligible for loans and the rate of interest you will be charged by creditors. Knowing credit basics can help you improve credit rating so you are better prepared when refinancing or borrowing money.
Order a Free Credit Report & Check for Errors
The website annualcreditreport.com is the only site approved by the Federal Trade Commission to provide the free credit report entitled to you under the Fair and Accurate Credit Transactions Act. The credit report allows you to analyze your credit utilization and loan application details. It is important to correct any discrepancies in the quoted figure or misspelled names immediately. If you want your credit score then you will nee to pay. There is a 7-day trial that you can use to check your score, if you don't plan to use the service again then just cancel before trial expires. Credit report errors can cause your application to be rejected, so a good credit rating is not the only factor that guarantees approval of your credit application. These errors include wrong credit limits, credit application that was never actually made, paid off debts showing up as active and incorrect social security numbers.
Understanding Your Credit Score Rating
- History of repayment: punctual payment is a must for good credit score, any default payments will be reported to credit reporting agencies.
- Total debt: credit utilization figure is important; your debt will seem higher if your credit limit is low. Ensure that you maintain the required percentage of credit limit.
- Credit length: If you have had credits for a long time and payments were made on time then your score will be good.
- Type of credit: owning different types of loans and credit cards improve your rating.
- Credit applications: limit credit searches as too many will affect your credit application; it can be taken as an indicator of financial instability and even fraud.
Understanding Your Credit Report and Credit Score Range
There are many different credit scoring systems and it may not be easy to understand. Explaining the score may end up confusing you too much. The common credit scoring system is the one provided by Fair Isaac Corporation called the FICO score. In this scoring system your credit score can range between 300 and 850.
The standard credit score cut off that makes you eligible to get credit is 600 and above. The basic concept involved in the scoring system is â higher the credit score ratings the lower is the cost of borrowing money. A score lower than 600 could make it difficult for you to get credit, lenders consider it a risk to approve credit for anyone with a score below 600. It is necessary to improve your ratings before you apply for refinancing mortgage or for a new loan.