By David Peel
Do you know your credit score? Ideally, you are so wealthy you don’t need one. But for the rest of us, when you apply for a car loan, insurance, credit card, or even a job, your credit score will matter. The number ranges from 300 to 850. A higher credit score—roughly 700 or above—can result in your getting approved for better terms and conditions. The range of scores are:
Excellent credit: 750+
Good credit: 700-749
Fair credit: 650-699
Poor credit: 600-649
Bad credit: below 600
There are five (5) major areas of information in your credit file that are used to calculate your score:
35% of the score is based on your History of Payments. The score is affected by how many bills have been paid late, and any sent out for collection. Bankruptcies or repossessions hurt a score. The more recent, the worse it will be for your overall score.
15% of the score is based on the Length of Time you’ve had credit. The longer you’ve had established credit, the better it is for your overall credit score. The easiest way to improve this is to be added as an authorized user to an older established account. Also, you may not want to automatically close old accounts, due to this factor.
30% of the score is based on Amount of Outstanding Debt. How much is owed on auto loans, home mortgage, home equity line, and credit cards matter. The closer your balance is to Credit limits, the worst this looks. The rule of thumb is to keep any card balances at 25% or less of their limits, if you have to carry a balance.
10% of the score is based on the Types of Credit you currently have. All kinds of credit accounts are not created equal. Installment loans, like a mortgage or auto loans, count more favorably.
10% of the score is based on New Credit Opening. Opening new credit accounts actually negatively affect your score.
Then, as the account ages, it can actually help your score. A hard inquiry are lenders you contacted or permitted to check your credit, such as for a new store card. This hurts your score.
A good credit score includes a healthy mix of all these factors.
If you identify an error on your credit reports, it’s crucial to dispute it immediately. Down the line, negative or incorrect identity-related information — like a misspelled name, wrong address or transposed Social Security number digits — can affect your ability to get credit cards, loans, insurance and even a job.
The dispute process can be time consuming and frustrating, especially if the result isn’t in your favor. It’s well worth the effort, however, if you succeed with your dispute. See AnnualCreditReport.gov for free reports and helpful tips.
Peel seeks justice for those injured in tractor trailer and car accidents, medical malpractice, and disability. He often addresses churches, clubs and groups without charge. Peel may be reached through PeelLawFirm.com wherein other articles may be accessed.
