Understanding Credit

understanding your credit scoreDid you know… that as adults we are still being graded on our work, even though we are not in school anymore?

Well we are, it’s our financial grades. Called Credit Reports and Credit Scores.

A Credit Report is your financial history from your creditors and public records. Credit reports contain your name, social security number, date of birth, addresses, all past and current liabilities, credit inquiries, public records and even collection items.

There are three national credit-reporting agencies. TransUnion, Experian and Equifax. These three agencies collect information from your creditors and public records every month, and update your report.

Working to build a positive credit history is extremely important to your financial health.

Lenders use your credit report to determine if you qualify for a loan, and at what interest rate. Insurance providers, landlords and employers frequently review a candidate’s credit report as well.

You can get a copy of your credit report at no cost. Just go to www.annualcreditreport.com. Review your report today and see where you stand. Review it for any mistakes and make it a point to correct them right away. You can do this by sending the reporting agency, and the creditor, a letter detailing the mistake, with your personal account details for each error.

Now let’s talk about your Credit Score.

Credit agencies say your Credit Score is a complex set of “mathematical algorithms.” Basically, it’s a financial grade you get from the three credit agencies. This grade is based on your past financial behavior.

Banks and lenders use this grade to determine how much of a risk you would be if they loaned money to you. Generally, the higher your score, the less risk you are. Meaning a higher score enables you to qualify for lower interest rates.

The major factors that contribute to your credit score are:

–  Payment History (35%)
–  Amounts Owed (30%)
–  Length of Credit History (15%)
–  New Credit (10%)
–  Types of Credit Used (10%)

You can also get your credit score and useful credit information at www.creditkarma.com at no cost. You don’t even have to provide a credit card for access.

I’ll have more for you about your credit, and how to improve it, coming up soon.

Remember, every dollar counts!

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Please share your comments and questions