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Credit Scores, reports, and helpful credit information Credit is a popular subject. It is something that most people deal
with on a daily basis. In this article, we explain what credit is, how
it works, how to read a credit report, and information on how to improve
your credit score. What is a credit score?A credit score is a figure used by creditors as an indicator of how prone you are to repay your loans. Who uses credit scores?Credit scoring is used by creditors, insurers, landlords, employers, utility companies, and others to deterimine your credit behaviour. How is a credit score calculated? There are various credit scoring formulas used for evaluation purposes.
Each credit scoring system is accurate for its own use. Credit reports
that are available online use an formula created for consumers which
approximates these various algorythms. Credit scores differ from one
formula to the next, but they are generally similiar.
What is a good credit score?A score above 630-650 is seen by most lenders as a creditable score. Scores under 630-650 may create problems when trying to apply for new credit. How can I improve my credit score?
Accuracy: Check your credit report regularly, if you find an inaccuracy on your credit profile contact the creditor associated with that account or the credit reporting agencies to correct it promptly. Magic Formula: Keep your balances between 30% - 50% of your available credit. Time: The longer you have positive credit, the higher your score. Avoid Excess Inquiries: A large number of inquiries into your credit report over a short period of time is a flag to potential lenders that you may be taking on excessive debts. Tips to Remember:Long running, positive credit is important. If you are consolidating your debt, do not close your oldest loans or credit card balances completely. Keep your debt to income ratio between below 10% -30%. Your debt payments should not exceed 30% of your monthly income. So if your monthy income is $3000, your total payments to lenders shouldn't be over $900. 10% -20% is a better ratio to shoot for. Before you consolidate, miss a payment or file bancruptcy:Did you know that you can ask lenders (especially credit card agencies) to lower your interest? Call your lenders and ask: "I have been offered to do a balance tranfer by another credit agency, this would lower my interest on my balance with you by a substancial amount. But, I have always appreaciated your quality of service, so I was wondering if instead of tranfering my balance, could you offer me a lower rate?" You'd be suprized how often this works. You don't need to buy a credit report if you are a US residentStarting in 2004- 2005, the US government passed a law which entitles all residents of the United States the ability to obtain a free credit report. Depending on where you live you might be able to get your free credit report now. From the Federal Trade Commision: Q: How do I know when I’m eligible to get a free report? A: Free reports will be phased in during a nine-month period, rolling from the West Coast to the East beginning December 1, 2004. Beginning September 1, 2005, free reports will be accessible to all Americans, regardless of where they live. Western states — Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming — can order their free reports beginning December 1, 2004. Midwestern states — Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin — can order their free reports beginning March 1, 2005. Southern states — Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, Oklahoma, South Carolina, Tennessee, and Texas — can order their free reports beginning June 1, 2005. Eastern states — Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, Vermont, Virginia, and West Virginia — the District of Columbia, Puerto Rico, and all U.S. territories can order their free reports beginning September 1, 2005. Q: How do I order my free report? A: The three nationwide consumer reporting companies have set up one central website, toll-free telephone number, and mailing address through which you can order your free annual report. To order, click on www.annualcreditreport.com, call 877-322-8228, or complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. The form is on the back of this brochure; or you can print it from www.ftc.gov/credit. Do not contact the three nationwide consumer reporting companies individually. They are only providing free annual credit reports through www.annualcreditreport.com, 877-322-8228, and Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. You may order your reports from each of the three nationwide consumer reporting companies at the same time, or you can order from only one or two. The law allows you to order one free copy from each of the nationwide consumer reporting companies every 12 months. For more info see the the link Your Access to Free Credit Reports on the Federal Trade Commision website.
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