Repair Your Credit Report to Improve Your Credit Score
A credit report is the treasured reserve of a persons financial credit history. Your credit report contains the most important facets of your credit. Currently, Americans have access to free credit reports once every twelve months. It is important to keep track of the contents of your credit report, as the contents can positively or negatively affect your credit score.
By viewing your report, you have the opportunity to evaluate the report for any errors. If you do find any errors, you can appeal to any one of the three major credit agencies: Experian, Equifax, and TransUnion for corrections. The three credit agencies have collectively set up a central site where consumers can go and request free credit reports.
As a result of remedying old inaccurate information present in your credit report, you can improve your credit over time.
Understanding Credit Scoring
A credit score is the terminal result of a complex formula that is used to estimate risk for lenders and creditors.
The information regarding your credit history such as, bill-paying history, the type and number of accounts you have, the timeliness of your bill payments, any outstanding debt, collection agency actions, and the length of your accounts, is obtained from your credit report.
Utilizing a statistical program, creditors and lenders compare credit report information to the loan and credit repayment history of consumers with comparable profiles. The positive weight of a good credit score and credit rating has immense impact on several aspects of your personal and financial situation. Creditors and lenders use credit scores to decide:
- Allocation of loans or credit cards
- Interest rates on your loans or credit instruments
- Increases in credit limits
Additionally, employers use your credit information to help them make decisions regarding your employment. Herein, your credit report and credit score are an instrumental part of your daily life.
Improving your Credit Score
The importance of a credit report can be judged by the importance placed on a persons credit score. Your credit score and credit history impact every facet of your financial picture. The credit score is a reflection of the information contained within your credit report. Sometimes, the credit score is referred to as a credit rating. The industry standard in the credit and loan community is the FICO score, issued by the Fair Isaac Corporation. Frequently, creditors and the public interchange the terms FICO score and credit score.
The credit score is a number that encapsulates your credit risk based on the information in your credit report. A credit score assists lenders in reviewing your credit report and in assessing your credit risk. The range for the FICO credit score is between 300 and 850, the median score is 723 (half of scores above and below). Any score from 600 to 850 is generally accepted as good to excellent (700 or above).
Credit scoring classification processes are complex and their utilization varies among creditors or lenders. There are certain steps you can take to improve your credit score over time:
Bill Payment History
- Make your bill payments on time – Late payments and collections can negatively impact your score.
- Get current on your payments, dont miss payments – By consistently paying your bills on time, you can boost your credit score.
- Avoid getting your account transferred to a collection agency – Even if you pay off your credit card debt balance, it will stay on your credit report for seven years.
- If financial distress occurs, contact your creditors and lenders – Dont stop making payments; maybe you can work out credit repair plan options with your creditors so that you can avoid hurting your credit score further.
- Maintain low credit card and revolving credit balances – Keeping high outstanding balances lowers your credit score.
- Never close unused credit card accounts – Simply, stow away unused credit cards; canceling credit accounts has a negative impact on your score.
- Dont try to increase your available credit by opening new credit cards – This can lower your credit score.
It is important to note that boosting your credit score is a bit like losing weight, there are no quick fixes and it takes time, effort, and discipline to achieve your goals. The best advice is to become fiscally responsible over time.