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What is your credit score? |
| I think we can all agree that our reputation is our greatest asset. Our second greatest asset is our Credit Rating. Today, most lenders use a scoring method, as well as other facts to make a credit decision. The scoring method used is called FICO (Fair Isaac and Company) score. |
| Your FICO score is derived from a mathematical equation evaluating various types of information on your credit report. Each credit reporting agency will have its own score because not all your credit information is contained in all agency reports. FICO scores range from 300 to 850 In most cases a score will break down as follows: 10% - Types of Credit in Use 10% - New Credit 15% - Length of Credit History 30% - Amounts Owed 35% - Payment History. Obviously, for those individuals who have been been using credit very long these percentages will vary. How do people score based on the general US population? |
| An understanding of the factors that make up your FICO score you will be better able to manage your credit - remember a better score affords greater financial options. These scores are based on your credit reports and the information contained therein. Therefore you would be wise to obtain a copy of your credit reports to insure the information is accurate. To request a copy of your credit report, contact the credit reporting agencies directly. The three credit reporting agencies are: Equifax, Experian, and TransUnion. If you do find an error the credit reporting agency must investigate and respond to you within 30 days. |
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What makes up your credit report? |
| It will contain (1) your "Identifying Information" such as name, social security number, birthdate, employer; (2) "Trade Line Information" - here your credit accounts are listed showing the type of account (credit card, morgtgage, auto loan, etc), when the account was opened, credit limit or loan amount, account balance and payment history; (3) "Inquires" - ever request for your credit report within the last two year period. "Voluntary" inquires are those generated when you apply for credit. "Involuntary" inquires occur when a lender orders your report to offer you pre-approved credit through the mail; and (4) "Public Record and Collection Items" - this information on bankruptcies, foreclosures, suite, wage attachments, liens and jusgments are obtained from the public record such as, state and county courts and collection agencies Don't worry if you have had poor credit in the past. These problems carry less weight as time goes on and these poor payment patterns are replaced with good payment patterns. While your FICO score will decline quickly as a result of late payments, backruptcy or judgments, it takes time to improve your score. If you are working to improve your score you would do well to check it quarterly. |
| WHAT STEPS SHOULD YOU TAKE TO RAISE YOUR SCORE? Pay bills on time - get current and stay current. If you're having trouble, contact your creditors. Low balances on all revolving credit accounts. Don't move debt around - pay it off. Don't open new credit cards to increase available credit - this could backfire. Don't close unused credit cards in good standing - it won't raise your score. If you are a new credit user, don't open a lot of accounts too soon. Shopping for an auto or mortgage loan - do it in a short period of time. Open new accounts only as needed. Have credit cards but manage them responsibly |
Information Provided Courtesy of The Nashville Team
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