Thursday, 7 May 2015
Your credit score is as important as your word.
And if you do qualify for a loan, your score determines the interest rate you will pay. Insurance companies, cable companies and even utility providers also use credit scores to calculate how much to charge customers for service and whether to require a deposit to open an account.
Because almost every financial action you take is influenced by your credit score--and because it's not uncommon for credit report errors to drag down your score — it's crucial to be aware of your score and do your best to keep it as high as possible.
Credit scores range from 500 to 850. While there aren't strict rules about what constitutes a bad score, in general, a low score is considered 699 or below.
You can check your credit once per year without hurting your score. The easiest way to obtain your credit report is by visiting AnnualCreditReport.com, a government-run that site will provide you with a no-cost credit report. Other for-profit sites may ask you to subscribe or charge a fee to check your score. You can also call or email the three credit bureaus directly:
In most cases, the credit score included on your report will be your FICO score, named for the company that developed it in 1989. Each of the credit bureaus may include different information in your credit report, so your FICO score can vary depending on which credit bureau provides the score. The exact formula used to determine a FICO score is protected, but FICO discloses some of the basic categories that affect a person's score:
If you want to build a higher credit score, consider the percentages attached to each category mentioned in the FICO score. The most important items in your report are delinquencies and charge-offs, your percentage of revolving credit that is open to buy, and recent credit inquiries. If you've let a bill go unpaid, especially within the past 12 months, that can be devastating to your credit score.
Because credit scores are constantly changing based on consumer behaviors, you can always improve your score by changing the way you use credit. Here are some of the quickest ways to lift your score:
It's fairly common to find an error on a credit report, so don't assume the credit bureaus always get it right. If you think you see an error on your report, call the consumer credit bureau that provided the report and state your case.
Don't be satisfied with the option to include an "explanation" on your credit report, because the explanation will not fix your score. Instead, it's your responsibility to get all the facts in writing, send the documentation to the credit bureaus, and follow up to make sure the error is corrected.
Even if the error only appears on one report, send all the documentation to all three credit bureaus to make sure the error is removed from your credit history. And keep following up until it's gone. Make a habit of checking your credit once a year. Just like an annual doctor visit, an annual checkup on your credit report can help you keep it healthy.
The content provided is for informational purposes only. Neither BBVA USA, nor any of its affiliates, is providing legal, tax, or investment advice. You should consult your legal, tax, or financial advisor about your personal situation. Opinions expressed are those of the author(s) and do not necessarily represent the opinions of BBVA USA or any of its affiliates.
Links to third party sites are provided for your convenience and do not constitute an endorsement. BBVA USA does not provide, is not responsible for, and does not guarantee the products, services or overall content available at third party sites. These sites may not have the same privacy, security or accessibility standards.
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