Understanding how credit is scored is a powerful way to establish yourself and your credit scores.
Many people want to maximize their credit; however, they really don't understand the very basics, which will hinder then when it comes to improving their credit.
The first thing that you should understand is that there are three main credit bureaus -- Transunion, Experian, and Equifax -- and each of these three give you a grade, or score, on your credit-worthiness according to what your creditors report to them.
The creditors that typically report this credit information are for the following types of credit; mortgages, car loans, installment loans, student loans, credit card companies, collection accounts, bankruptcy and other public information, and a few others.
While each of the three credit bureaus may use slightly different variables to get to your score, the FICO scoring model is still the major credit scoring model that is used today.
What is FICO anyway? FICO stands for Fair, Isaac and Company, the group that designed the model.
According to the FICO model, here are the factors that determine your credit score:
Knowing the components of your credit score is helpful; however, you will need your own copy of your credit report in order to start taking any action to fix your credit score.
So, how do you get your hands on your own credit report? Getting a credit report is quite simple, especially considering that you are entitled to obtain a free copy of your credit report every 12 months.
However, getting your credit score can be much trickier.
Make sure any company you pay to send you your credit report is also sending you the credit score, so you know the exact number that lenders are receiving.
Credit companies that give you access to your credit report typically charge extra to include your scores in your report.
This is a good investment though, because you'll know the temperature of your credit! One service that I recommend is using Credit.
com.
They will send you a free copy of your credit report with your credit report with a membership.
If you don't plan on keeping your membership with them for some reason, you have to remember to cancel your membership within their 30-day period, and you only receive one of the three bureau's reports.
Hopefully, you now have a better grasp on the importance of credit and your credit score, and knowing these facts will definitely put you ahead of the pack!
Many people want to maximize their credit; however, they really don't understand the very basics, which will hinder then when it comes to improving their credit.
The first thing that you should understand is that there are three main credit bureaus -- Transunion, Experian, and Equifax -- and each of these three give you a grade, or score, on your credit-worthiness according to what your creditors report to them.
The creditors that typically report this credit information are for the following types of credit; mortgages, car loans, installment loans, student loans, credit card companies, collection accounts, bankruptcy and other public information, and a few others.
While each of the three credit bureaus may use slightly different variables to get to your score, the FICO scoring model is still the major credit scoring model that is used today.
What is FICO anyway? FICO stands for Fair, Isaac and Company, the group that designed the model.
According to the FICO model, here are the factors that determine your credit score:
- 35% - payment history
- 30% - amounts owed
- 15% - length of credit history
- 10% - types of credit
- 10% - new credit
Knowing the components of your credit score is helpful; however, you will need your own copy of your credit report in order to start taking any action to fix your credit score.
So, how do you get your hands on your own credit report? Getting a credit report is quite simple, especially considering that you are entitled to obtain a free copy of your credit report every 12 months.
However, getting your credit score can be much trickier.
Make sure any company you pay to send you your credit report is also sending you the credit score, so you know the exact number that lenders are receiving.
Credit companies that give you access to your credit report typically charge extra to include your scores in your report.
This is a good investment though, because you'll know the temperature of your credit! One service that I recommend is using Credit.
com.
They will send you a free copy of your credit report with your credit report with a membership.
If you don't plan on keeping your membership with them for some reason, you have to remember to cancel your membership within their 30-day period, and you only receive one of the three bureau's reports.
Hopefully, you now have a better grasp on the importance of credit and your credit score, and knowing these facts will definitely put you ahead of the pack!
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