Credit scores are considered a fundamental measure to determine an individual’s capability to handle financial obligations. It has an impact on transactions such as mortgages, credit cards, auto loans, and more. In fact, for lenders, it’s a qualifying factor to gauge one’s creditworthiness. Some of the investigated elements are your total debt, the number, and types of accounts, and the number of late payments for any existing credit.
Understanding what influences your credit score can help you maximize your score before applying for a loan and getting the best rate for your mortgage. Let’s look at what you need to know:
What is a good credit score?
According to Equifax, “although ranges vary depending on the credit scoring model, generally credit scores from 580 to 669 are considered fair; 670 to 739 are considered good; 740 to 799 are considered very good, and 800 and up are considered excellent.”
A high credit score implies good and responsible credit behavior, making lenders and creditors more confident when evaluating a credit request.
What information can you find in your credit report?
A credit report is a summary of your credit history. The three major credit bureaus — TransUnion, Equifax, and Experian — collect credit and other information about you.
In your credit report, you’ll find details such as:
- Name, Address, Social Security Number
- Credit Cards
- Whether you pay bills on time
- If you’ve ever filed for bankruptcy
How do I nurture a good credit score?
Have a good credit score comes with many benefits, including lower interest rates on credit cards and loans. It can also help save money on insurance and security deposits on certain utilities. Here’s a quick guide
- Be knowledgeable about what a good credit score is and work your way towards maintaining it.
- Pay all your bills habitually on time to maintain a good credit score. Even the smallest fines could make or break your credit report if left unpaid.
- Try spending only 30-40% of your credit limit per month. Maxing out on your credit card could give a negative impression on bureaus (considering your spending habits as risky).
- Don’t forget that closing an account lowers your overall amount of credit, so pay close attention to how your credit utilization percentage may change,
- Establish good credit as soon as you start on it. Remember that agencies will check your historical data to determine how reliable you are when it comes to your financial habits.
- Too much debt will cost you points. Note that the lower the debt, the better it is.
- Don’t close your old credit cards. When you close a credit card account, the issuer stops sending updated information to the credit bureaus—Experian, Equifax, and TransUnion—and your credit scoring formula places less weight on inactive accounts.
- Have multiple credit cards, that are paid off regularly this will establish a revolving line of credit, and show that you have the ability to start, keep and maintain a credit card balance.
- Always check your credit report. Identity theft and credit card fraud also can lead to inaccurate information and might give lenders wrong assumptions about your credit standing.
How can I settle any contentions on my credit report?
According to the Fair Credit Reporting Act (FCRA), the credit reporting company and the information provider (the person, company, or organization that provides details about you to a credit reporting company) are accountable for correcting inaccurate information on your report. Contact either your credit reporting company and the information provider if there are disputes to be settled.
If you need a professional to check on your credit score, we offer these types of services. Contact Ultra Mortgage to discuss your credit standing and how we can work towards bringing your score up!