Many Consumers Know That They Have A Credit Score But They May Not Know What The Score Is

Category: Finance.

Many consumers know that they have a credit score but they may not know what the score is. Again, they know the broad picture, but not the details.

As well, many consumers know that there are some actions or inactions that they can take that will help or hurt their score. Here are some of the things that consumers do that all but massacres their credit score. This is one of the most important reasons why consumers must keep an eye out for mistakes or omissions on their reports. First of all, consumers should understand that lenders and creditors are constantly updating the information that is on a person s credit report. Credit reports are not static. These reports are used to determine your credit score. Some actions or inactions that can kill a credit score follow: Not examining credit reports often enough is one of the most common problems that consumers face.

If there are mistakes, you need to get them corrected. FICO credit scores are calculated from five categories listed on credit reports: your payment history, amount of money owed, length of credit history, and types of, new credit obtained credit used. The truth is one in four credit reports contain errors that are serious enough to hurt a consumer s chances of getting loan. The second thing many consumers do to hurt themselves is to pay late. In general, payment history accounts for 35 percent of the credit score. Late payments are recorded on your report and they usually stay there for seven years. The third thing that can cause problems is simply having too many credit inquiries.

Rate shopping for a car loan, or a credit, a home mortgage card can damage your credit if it is not done properly. A credit inquiry occurs whenever someone wants to look at your credit file. Lenders you approach ask credit bureaus for a copy of your report for review. Minimize the potential damage by rate shopping within a short period of time, such as a couple of weeks. This request shows up on the credit report as a hard inquiry, which affects your credit score. According to myfico. com, "Multiple inquiries from auto or mortgage lenders in a short period of time are typically seen as one inquiry and have little impact on your score. " Believe it or not, closing your old accounts can damage your score because, doing so may, in essence shorten your credit history.

Closing accounts will also affect what is called the credit utilization ratio. Credit history makes up about 15 percent of the score, so you do not want to shorten it unless it is absolutely necessary. This is the amount of credit you are using relative to the amount of available credit you have. Consumers should be very aware of the amount of debt that they have on the books. Closing an account will cause your ratio to go up because closing the account drops your total available credit while not reducing the amount of credit you are using. Amounts owed will make up nearly 30 percent of the score.

Lastly, consumers should be careful about cosigning for another person. The more you owe, the lower your score will be. If the other person does not pay on time you will most likely see a reduction in your credit score. Keep track of what is on your credit reports and you will have done a lot to maximize your credit score.

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