Your credit score and credit report are two different things and many people don’t realize this when they request their free credit reports. They become upset when their credit score is not listed and then become frustrated when attempting to find out what their true credit score is. It is important to understand how your credit scores are calculated.
Credit scores are based on a numbering system called FICO which was put together by the Fair Isaac Corporation. No-one really knows exactly how this scoring system was put into place, but it is broken down into segments which look at different areas of your credit. The FICO system is based upon how you pay your bills each month, if you pay them on time or if you allow any to run over into a 60 or 90 day payment period. Your amount of debt is taken into consideration. Your total number of years of credit history is also looked at. The types of credit you have and how often you apply for new credit are additional factors in determining your score.
Each of the above points are allocated a certain percentage factor. These percentages combined make your credit score. An above average credit score is 750 while a credit score below 650 is considered a problem. If your number is 650 or lower you will not be given any credit. Your credit score can be greatly affected by losing even a few points. This is because your credit determination comes from different sources. So even a drop of 10 or 20 points can really become an issue for you, this is why it is important to look at your credit reports each year. Some of the items which you need to take a close look at on your credit reports include:
• Checking that bills that were paid on time are not reported as being late
• Loans that have been paid and discharged are reported as closed
• Another family member’s credit showing up on your report
• Errors in amounts that have been paid on loans. Unfortunately many errors do appear on your credit reports and these adversely affect your credit scores.
By carefully checking your credit report each year you can keep on top of the situation and correct mistakes. This way when you do decide to apply for a loan or mortgage your chances of being approved are that much higher. For additional information on Credit Scores and Credit Reports fill join our mailing list by filling out the contact form on the "Contact Us" page, and writing list me in the comment section.
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Take control of your credit now! While you continue to wait; the great deal on that car you wanted will be over; the house you dreamed of will be sold; the job you had your heart set on, will be given to someone with a better credit score. Nothing is ever gained by procrastination. Start Your Journey on the Road to Good Credit Today!