What do you consider the most important number in your life? Your social security number? Your birth date? Your phone number? While the majority of people don’t know this number, it pretty much rules your finances --- it’s your credit score.
A credit score is used by lenders in the decision making process of “if I give Person #1 a loan or credit card, how likely is it that Person #1 will pay me back on time?” This number is also called a risk score and is actually a statistical measure of the risk that a person will be able to repay the debt as agreed.
A good credit rating is essential these days if you plan on making a major purchase, apply for a credit card, or take out a loan. If your credit rating isn’t as positive as you’d like, there are ways to improve it.
WHERE DO I GO TO FIND OUT MY SCORE?
There are three major credit reporting bureaus and you are entitled to one free report per agency, per year. And, the reported score may be a different number from one agency to the other. You also have the right to dispute any errors on the report(s). Request a written report to be sent to you:
Equifax www.equifax.com
Experian www.experian.com
TransUnion www.transunion.com
You can always call any of us at the office,at 913-642-3334 or email me at michele@wantinsight.com for additional information on credit scores.
REVIEW THE REPORT
It’s been reported that nearly 80% of all credit reports contain at least one error! So, review your report carefully. Once you’ve identified any discrepancies, they’ll need to be eliminated. A dispute form usually accompanies the credit report (or request one from the website). Fill it out and send it back as Registered Mail. Documentation of each step you take is important, so keep a “paper trail”. And note that the law states that any item that is not verified as accurate must be removed from your report.
IT’S CLEAN UP TIME
Now the mistakes are cleared up, but there are still a few blemishes that are yours. What next? Identify any debts that are still pending and make a plan for eliminating them. It takes time to clear up debt, so it’s important to start now. AND, you also have the legal right to add remarks to your file. This is an opportunity to defend yourself and also highlight the positive points in your report.
WASH & REPEAT
Consistent payments (small is fine, as long as it’s the minimum due) is key. Consistency proves you are responsible enough to repay loans as promised. Over time, that consistency outweighs the possible negatives on your report.
LOOK AGAIN
Check your credit information at least once a year to avoid any nasty surprises when you’re ready to make a major purchase.
OTHER NUMBERS
It’s good to have a few open lines of credit, none max’ed out, and no more than what you can afford to pay off on your income. Cancel old cards you don’t use any more. BUT, do not use up one huge line of credit by putting your full amount of debt on it! Credit card issuers like to see no more than 30% of your limit accessed at one time. Prove your self control by having 2-4 lines of credit with a small or even no balance on each.
For help with any of your credit related questions please call me, 913-642-3334, or email me at michele@wantinsight.com
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