why do you need to know your credit score
January 29, 2015
Credit scores and reports can be confusing, but if you want to take out a loan for a house or car one day, you need to understand what they are and why theyвre important. We take a look at what you need to know about your credit score and report. What Are Credit Scores and Credit Reports? A is a number that ranges from 300 в 850 and is used to indicate your creditworthiness. Lenders look at your score as an indication of your ability to repay your debts. A credit report is a detailed overview of your credit history. It includes all your credit accounts, credit cards, loans, credit limits, account balances and payment history. Knowing both your credit score and whatвs on your credit report is essential, because without your report, you donвt know what factors influenced your score. Your report will give an overview of what youвre doing right and areas where you can change your behavior to increase your score. The type of credit you have. For example, student loans, car loans, and your mortgage as well as store credit cards. Credit utilization. This is how much credit youвre actually using. Using too much of your available credit will increase your score. Late payment history. Late payments negatively impact your score the most in the first two years, but they will stay on your report for seven. found that one in five consumers had an error on their credit report that could be corrected by a credit reporting agency. Twenty percent of the consumers who found errors experienced an increase in their credit score once the error was removed. Make sure your report is up to date before you go to a lender for an auto or home loan; you donвt want to be denied for a mortgage over an error that could have been prevented.
If you do find a mistake, file a dispute with the creditor and the credit bureau to get it fixed immediately. Your credit score is important for a few reasons. First, it influences your chances of getting approved for a loan or credit card. This is particularly important if you want to in the future because your. Your score also influences your interest rate; the higher your credit score, the lower your interest rate will be and vice versa. Because your score is supposed to show your ability to repay your debts, lenders want to ensure youвre going to pay them back in full, so they might give you a higher interest rate or deny you altogether if your score isnвt high enough. This can cost you a lot in the long run and might even mean youвll have to rent instead of purchase. Getting your credit score and not your report is similar to getting a test grade in school without getting the actual test back. How can you know what you did wrong and what you did right without the actual test? Credit scores and reports work in the same way. You wonвt know what has influenced your score if you havenвt seen your report. Use a site like to obtain your score free of charge and to view your report. Once you have this information, you can determine whatвs impacted your score so you can take steps to. Do you have any questions about your credit score? Post in the comments! Why is my credit report important? If you apply for one of these, the business wants to know if you pay your bills. The business also wants to know if you owe money to someone else. The business uses the information in your credit report to decide whether to give you a loan, a credit card, a job, or insurance.
What does good credit mean? Some people have good credit. Some people have bad credit. Some people do not have a credit history. Businesses see this in your credit report. P Different things happen based on your credit history: Why should I get my credit report? You might find somebodys information in your report by mistake. You might find information about you from a long time ago. You might find accounts that are not yours. That might mean someone stole your identity. You want to know what is in your report. The information in your report will help decide whether you get a loan, a credit card, a job or insurance. P If the information is wrong, you can try to fix it. If the information is right but not so good Pyou can try to improve your credit history. Where do I get my free credit report? You can get your free credit report from Annual Credit Report. That is the only free place to get your report. You can get it online:, or by phone:P 1-877-322-8228. You get one free report from each credit reporting company every year. That means you get three reports each year. What should I do when I get my credit report? Your credit report has a lot of information. Check to see if the information is correct. Is it your name and address? P Do you recognize the accounts listed? If there is wrong information in your report, try to fix it. You can write to the credit reporting company. Ask them to change the information that is wrong. You might need to send proof that the information is wrong for example, a copy of a bill that shows the correct information. The credit reporting company must check it out and write back to you. P How do I improve my credit? Look at your free credit report.
The report will tell you how to improve your credit history. Only you can improve your credit. No one else can fix information in your credit report that is not good, but is correct. It takes time to improve your credit history. Here are some ways to help rebuild your credit. Pay your bills by the date they are due. This is the most important thing you can do. Lower the amount you owe, especially on your credit cards. Owing a lot of money hurts your credit history. Do not get new credit cards if you do not need them. A lot of new credit hurts your credit history. Do not close older credit cards. Having credit for a longer time helps your rating. After six to nine months of this, check your credit report again. You can use one of your free reports from Annual Credit Report. How does a credit score work? Your credit score is a number related to your credit history. If your credit score is high, your credit is good. If your credit score is low, your credit is bad. P There are different credit scores. Each credit reporting company creates a credit score. Other companies create scores, too. The range is different, but it usually goes from about 300 (low) to 850 (high). P It costs money to look at your credit score. Sometimes a company might say the score is free. But usually there is a cost. What goes into a credit score? Each company has its own way to calculate your credit score. They look at: They look at the information in your credit report and give it a number. That is your credit score. It is very important to know what is in your credit report. If your report is good, your score will be good. You can decide if it is worth paying money to see what number someone gives your credit history.
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