What Goes Into a Good Credit Score?

Do you have any idea how much a good credit score can impact your life? It can open up job opportunities, make getting a cell phone contract or a new apartment a piece of cake, and even reduce your monthly payments on a car loan or mortgage. If you want good credit, though, there are a few things you need to focus on. Each credit reporting company looks at credit slightly differently, but they all emphasize different points. Here is a picture of what a good credit score looks like.

First off, a good credit score is based on a low amount of debt overall. Stationary debt like student loans and mortgages count here, but they really only count against you if you fail to make regular monthly payments on time. The most important thing here, though, is your debt-to-credit ratio. This involves revolving debt such as credit cards and lines of credit.

Let’s say that you have a credit card with a $5,000 limit. If you use it only for gas and pay it off every month, you’ll be carrying a zero balance, which is great for your credit. If you’re carrying a $2,000 balance, less than 50% of your limit, that’s not too bad and won’t count against you too much. If you’re carrying a $4,000 balance, though, that will hurt your credit because you’ve almost maxed out your limit.

Debt-to-credit ratio is one of the most important pieces of a good credit score. This is why people who want good credit scores focus on paying down revolving debt and unsecured loans.

Another important piece of your score, too, is whether or not you make payments on time. Late payments on your cell phone, apartment, credit card, mortgage, car, or pretty much anything else can count against you here. Even one or two late payments can wreck a credit score, so most people with a high score have no late payments within the past few months or even years.

One other important aspect of the credit score is the age of your credit. The longer you’ve had at least one credit account, the more your score will improve. This is why it’s important not to close lines of credit even after you aren’t using them anymore. A person with good credit will generally leave these lines open, using them occasionally and paying them off immediately.

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How to Dispute Mistakes on Your Credit Report

Did you know that almost 80% of credit reports have a mistake on them? Many times, these mistakes can keep you from getting loans, apartments, or even job offers. Your credit report and score are a huge part of your life, and if your report isn't accurate, you could suffer serious financial damage. A poor credit score can cost you hundreds or even thousands of dollars a year! The problem is that many people don't even know there are mistakes on their credit reports. If you haven't checked your report in a while, order a copy of your credit report from all three major credit bureaus – Equifax, Experian, and TransUnion – today.

When you get your reports, which you can do instantly online, check them over carefully for errors. Sometimes they have clerical errors like incorrect or misspelled addresses or even names. Other times, the errors are with account information. Look for accounts you?ve closed, credit you never took out, or amounts that are reported inaccurately. Keep in mind that your scores are only updated once a month or so. If you've recently paid off a debt or closed an account, it may not yet be shown that way on your report, but this might not actually be inaccurate – just not up-to-date.

If you do see mistakes, which is likely considering the common nature of mistakes on these reports, you need to go about fixing it. Your first step is to contact the credit bureau. You can do this online. Basically, you'll just ask them to look at that particular mistake, conduct research as to its accuracy, and take it off your account. The bureaus are required to respond to your request within three months by either removing the inaccurate information or by telling you why they can?t do that.

Sometimes things get a little messier than this. You may actually have to call the creditor or send a letter to have them report the closed account, settled debt, etc. to the credit bureau. Sometimes this takes a process of phone calls and letters sent before you can get rid of mistakes. It's important that you keep going until the information is removed. Also, keep careful records of every single phone call or letter, along with what information you get back from the companies you?re communicating with. This will give you recourse in the case that the company tries to wiggle out of your claims of inaccuracy.

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Top Three Ways a Bad Credit Score Hurts You

Many people know that their credit scores have an effect on their lives, but they don?t realize the actual ramifications of that score. Your credit score invades every single portion of your life, and it can hold you back or push you forward in a lot of ways. If you don?t have a good credit score, you might be wondering what, exactly, that is going to affect. The truth is that a bad credit score can affect all sorts of things in your life. Here are just the top three ways a poor score can affect you.

First, a bad credit score can obviously affect your chances of getting credit. This is what it?s primarily used for. Your score helps potential lenders assess how responsible you are with money and how much extra debt you can afford to take on. If you already have a lot of debt or a history of failing to make payments on time, you are much less likely to get a mortgage, car loan, or credit card than if you had a good score.

Not only can a bad score keep you from getting the loan you need, though, but it can also keep you from getting good rates on a loan you do receive. It may not seem like much, but a difference of even one or two percent can make a big difference on your payments and overall interest payments over the life of your loan.

Second, a bad credit score can actually keep you from getting a job. That?s right. Many people are totally unaware of this fact. Basically, when you are applying for a job, your potential employer will assess your character in every way possible. Many will pull your credit score, which is a measure of overall responsibility and lifestyle. If your score is terrible, you may get turned down for a job that you are otherwise qualified for!

Third, a bad credit score can keep you from getting things like a cell phone contract or a rental home. These things, too, rely on your credit score as a measure of your responsibility. If you?re notorious for missing or making late payments, you?ll be less likely to get a contract with landlords and other companies.

As you can see, having a poor credit score can really leave you with some poor life options. This is why it?s vital to take every possible step you can to repair your credit score.


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