May 23, 2022

Understanding Your Credit Score

Whenever a person makes a purchase that requires regular payments their credit score will be checked. This score will indicate how reliable they were in past purchases. It will also show credit accounts with various companies and any irregularities, such as payments made with insufficient funds or not made on time.
Credit Score

Having a good credit score is essential in today’s world when so many purchases are made with long term payments. Unfortunately, this also opens a wide avenue for purchasing goods with a large number of vendors. This will also show up on a credit report and may be detrimental as indicating that there is too much outstanding debt.

A credit report, when looked at by a rating company, will be scanned for payment history, outstanding debts, new credit, credit history and credit currently active. All of these have certain percentage points that are combined to arrive at the rating total. Ordinarily, this score can range from the lowest of 300 to a perfect 850.

Merchants and lenders sent reports to certain reporting companies. The ones most used are Equifax, Experian and TransUnion, with reports available from any of these companies. Although scores may vary somewhat between these companies, scores below 620 are not good and are considered a risk, with 723 the median score.

Under the law, a person is entitled to one free credit report a year, simply by asking. With the high event of identity theft and the possibility of error, it is a good idea to check one’s report every year. Many times there are errors that need to be corrected in order to keep one’s good credit record.

There are companies located on the Internet that provide a service which keeps a person informed of their credit score, analyses the report regarding anything that affects it, monitors and alerts the client of any suspicious activity. Many also will send an immediate email if something appears on the record that looks unusual and provides an identity theft insurance with no deductible. A number of people are engaging this service because of the identity theft activity of the past few years.

A number of things can influence a person’s score. Such a thing as ‘no debt’ can be a detriment because there is no record showing that one would be good at making regular payments. So, if in the habit of paying cash for everything, taking out something like a credit card and paying it in full each month will establish a credit record. Even if the purchases are as little as $10.00 each month, it will set the pattern.

Some people have found the services of a mortgage broker or another service good way to repair credit. Their experts will analyze the situation and map out a strategy to bring the record back up, into an acceptable range. If there is a problem of a low rating, changes will not take place over night. It takes time to make changes in financial activities as well as for payment reports to reach a rating company and the score be changed.

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