Credit Reports and Scores

As an adult, it is very difficult to avoid opening a line of credit.

Even if you are not interested in a credit card, you will most likely have to take out a loan to pay for large expenses, such as buying a car, purchasing a home or attending university. Whenever you want to take out a loan, your lender will perform a credit check to determine how financially reliable you are. Your credit score is important lets the lender know how much money he or she can safely provide you. Lenders will also use your credit score to determine details about your interest rate and possible payment plans. In addition to lenders, some hiring managers will perform a credit check as part of the job interview. Landlords are also likely to check your credit score before renting property to you.

There are many factors that influence your credit score. It can take a long time to establish credit, and even longer to repair your credit score once it has lowered. If you understand everything that goes into a credit report, you should be able to build up a reasonable credit score. If you have ever been a victim of identity theft, you will have to take additional steps to protect your credit score.

What factors affect your credit score?

Your credit score is a three-digit number, typically ranging from 300 to 850. The higher the score, the better your credit rating. There are five different factors that determine your credit score. These include:

  • Your past payment history.
  • How much you currently owe in debts.
  • Your overall credit history.
  • New credit applications made on your behalf.
  • Your current types of credit.

Each of these factors has a different weight. For example, your payment history is the most important aspect when determining your credit score, while credit inquiries and your types of credit typically have a minor impact on your credit score. However, these small increases or decreases may ultimately change whether your credit is considered good or average.

If you are trying to improve your credit score, it is very important that you understand all the different factors that influence your score. Knowing these factors allows you to prioritize the largest influencing factors to quickly increase your credit score.

How to Establish Credit

Establishing a credit score in the first place can be very challenging. You must first open a line of credit to get a credit score, but most credit sources require you to have an existing credit score before approving your application. This can create a difficult to break cycle where you are trying to establish credit but are being denied because you lack any existing credit. There are a few different ways you can first establish a line of credit.

One of the ways is to get your first credit card from your bank instead of a traditional credit card company. If this is not an option, you may be able to open up a secured credit card to start building up credit. A secured credit card requires you to put down a security deposit on your credit card. These cards also lack any special bonuses, and the total limit is determined by your deposit. You can also open a joint account with someone else who has better credit or have someone co-sign a credit application on your behalf. When you do this you “adopt” some of their creditworthiness.

Tips for Repairing Your Credit Score

Unfortunately, if you have ever experienced a financial hardship, there is a good chance your credit score has taken a significant hit. Repairing your credit score can be difficult if you are not organized and diligent. When you are in debt, your credit score starts to decrease, which makes it harder to find financial assistance to get rid of your debt. As you climb out of debt, you are likely missing payments or incurring interest, which further damages your credit score.

There are a couple of steps you can take to repair your credit score. Learning how to read a credit report is an important first step, since your credit report will indicate the areas you must improve to salvage your score. Some steps you are usually required to take to repair your credit score include setting up new payment plans, getting up to date on any existing debts and paying off any collection agencies you have been reported to.

 

How to Check Your Credit Report and Credit Score

Most people are not aware they have credit problems until they have been rejected for a loan or a credit card. Unfortunately, if you wait this long to find out you have poor credit, it takes much longer to repair your credit score. In order to avoid this problem, you should look at your credit report at least once a year. There are a few different ways you can request a credit report. By law, three of the major credit bureaus are required to provide a free credit report each year.

You should look at multiple credit reports, since the information may be slightly different depending on who is providing the report. There is also the possibility your credit score has been lowered because of an error on your credit report. The sooner you catch the error by looking at your credit report, the easier it is to correct and repair your credit score.

How to Recover from Identity Theft

Identity theft is very dangerous because it allows a complete stranger to open up a line of credit in your name. An identity thief will not have any concerns for your finances. The most common scam for identity thieves is to open as many credit accounts as possible using your name, and quickly max out each account with a series of large purchases. Once the accounts are maxed out, the credit providers will reach out to you to make the payments.

There are many steps you can take if you are a victim of identity theft. The first steps involve reporting the theft to a number of different sources, including the police, your bank and all your credit card providers. Once you report the charges, your accounts are either frozen or marked as a potential fraud victim. From there, you can start disputing the charges to regain your previous credit score.

 

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