Use a Free Credit Score and Credit Reports to Empower You
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The interest rates and kinds of loans you are offered is directly related to your credit score. To sustain or improve your credit score, you need to understand what a credit report and credit score are and how potential lenders use them to determine if you are a good or bad credit risk. Being aware of the details of your credit history that lenders and banks request will help you navigate the lending waters better. A free credit report and a free credit score are an important part of the process.
Credit bureaus gather information about you when you open a new bank account, change your employment status, or pay a utility bill. There are three major credit bureaus in the U.S. They are Equifax, Experian and TransUnion. Credit bureaus provide an overview of all that information to potential lenders via a credit report. Your credit report provides a snapshot of all your accounts and loans, payment history, payment behavior, debt, available credit, employment history and any other public records. That data is helpful in assessing your credit risk to a potential lender, employer or insurance carrier. Under the Fair Credit Reporting Act, FCRA, every consumer is entitled to one free credit report (not to be confused with a free credit score) from each of the three major credit bureaus annually. A credit score is an assessment of how risky it would be for a lender to offer you a loan. Your credit score is calculated from the information on your credit report. Most lenders use the FICO score, which assigns a number between 300 and 850. It simply refers to the firm, Fair Isaac Corporation, that created the statistical method over 20 years ago. By analyzing the types of credit and debt you own, the accounts you recently opened, how long you have had your accounts, and your payment behavior (on time, late, intermittent), your numerical credit score is calculated. The lower your score, the higher the potential risk you pose to a bank. The interest rates and terms of a loan offered to you are dictated by your credit score. Consumers with lower credit scores will be saddled with higher interest rates. Banks may not even offer those with lower scores a loan, as those consumers appear to be a risk for fulfilling their payment obligations when compared with consumers with higher credit scores. As mentioned, FCRA entitles everyone to a free annual credit report from each bureau. Unfortunately, a free credit score is not a benefit set forth by the legislation.
If you pay your bills in full when they are due, you are doing the most important thing to cultivate your credit score. Secondly, most financial experts recommend keeping a credit card balance of no more than 25 percent of your available credit. Third, do not open many new credit accounts in a short amount of time, as this can negatively affect your score in the short term. Fourth, close accounts you may have forgotten about to protect yourself from fraud. Try to maintain one of your oldest credit cards (assuming it is in good standing), since longevity is one of the aspects analyzed for your credit score. Finally, know who is requesting your credit file and make sure those requests are absolutely needed. Too many inquiries can lower your score.
Take charge of your own credit history. Obtain the free annual credit report from Equifax, Experian and TransUnion that FCRA gives you the right to. The report from each bureau may differ slightly from the other, so comparing them against one another is important. Again, FCRA does not entitle you to a free credit score. When you apply for a loan, however, you can ask the bank for your free credit score. Make sure you remedy mistakes you find on your credit report as soon as possible. Continue to monitor your credit history, whether by utilizing a free credit score or free credit report, or by paying for them. You are your best credit advocate.
Article Source: Articlelogy.com
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