Credit Scores: Things You Should Know

BANKS, CREDIT CARD COMPANIES AND OTHER BUSINESSES USE CREDIT SCORES TO ESTIMATE HOW LIKELY YOU ARE TO PAY BACK MONEY YOU BORROW.

A higher score makes it easier to qualify for a loan or lower interest rates. Many scores range from 300 to 850, but different companies use different ranges.

You have many credit scores

You can have more than one score, because:

  • Lenders use different scores for different products.
  • There are many different credit scoring formulas.
  • Information can come from different credit reporting sources.

For example, your credit card score could be different from your home loan score, and the scores you purchase online could be different from both of those.  For some people, these differences aren’t that big. But because lenders use different scores, you might qualify for lower rates with one lender and not another. It can pay to shop around.

Where do credit scores come from?

Your credit scores are generally based on information in your credit reports. This information is   reported by your lenders to credit reporting companies. The three biggest are Equifax, Experian, and TransUnion.

Several variables affect your credit score:

  • How many credit accounts you have
  • How long you’ve had those accounts
  • How close you are to your credit limit
  • How much credit you have left
  • How often your payments have been late
  • Other factors

How to raise your score

  • Pay your bills on time, every time. One way to make sure your payments are on time is to set up automatic payments, or set up electronic reminders. If you have missed payments, get current and stay current.
  • Don’t get close to your credit limit. Credit scoring models look at how close you are to being “maxed out,” so try to keep your balances low in proportion to your overall credit limit. Experts advise keeping your use of credit at no more than 30 percent of your total available credit.
  • A long credit history helps your score. Credit scores are based on experience over time. Your score improves the longer you have credit, open different types of accounts, and pay back what you owe on time.
  • Be careful closing accounts. If you close some credit card accounts and put most or all of your credit card balances onto one card, it may hurt your credit score if you are using a high percentage of your total available credit. Frequently opening accounts and transferring balances can hurt your score too.
  • Only apply for credit you need. Credit scores look at your recent credit activity as an indicator of your need for credit. If you apply for a lot of credit over a short period of time, it may appear that your money situation has changed for the worse.

 

Call a $tand By Me 50+ Financial Coach today to see and review your credit report and/or see what to do to improve it at 302-651-3401 and 302-651-3427 in New Castle County

and 302-415-1542 in Kent and Sussex County.

All of our services are FREE!