These days your credit score plays a big role in your ability to buy a car, a home, or rent an apartment. Your credit score also plays a role in your loan and credit card interest rates. It’s also been known to be a deciding factor gainful employment. There are many reasons why it’s important to know your credit score and how you can keep your score as high as possible.
Your Credit score is derived from information compiled in a credit report. These numbers are what lenders use to determine how likely you are to repay your debts on time. Credit reports include:
* Your repayment history: Missed or late payments.
* Utilization ratio: The amount you owe creditors compared to the amount of credit available to you.
* The extent of your credit history: How long your accounts have been open.
Know Your Number. Get a current copy of your credit report and review it for accuracy. All U.S. consumers are entitled to “free” annual credit reports from the major credit reporting agencies, which are Experian, Equifax, and TransUnion. You can request all three reports at www.AnnualCreditReport.com.
Credit scores, unlike credit reports are not free. You can purchase your credit score at www.myFICO.com or from one of the three above mentions agencies. Credit scores typically range between 300 and 850 points. Though, lenders may base their lending decisions on the particulars of the situation, the higher your score the better. The higher your credit scores the lower perceived risk to a lender who is more inclined to offer better interest rates on your loan.
Room for Improvement. Do your credit scores have room for improvement? There are numerous reasons that a credit score may go up or down from time to time. Here are a few tips for raising or maintaining a higher credit score, these include:
* Paying your accounts on time and keeping your balances low. Payment history determines about 35% of your credit score. Lenders are looking for a proven track record of making timely payments.
* Being conservative in the amount of available credit you use at any given time.
* Utilization: About 30% of your score is determined by what the industry refers to as your "utilization ratio," which is the amount you owe in relation to the amount of credit available to you. If that percentage is more than 50%, your score will be lower.
* Holding on to older, unused accounts: The longer an account has been open and managed successfully, the higher your score will be.
* Maintaining a diversified credit mix: Those who have a well-managed home mortgage, auto loan, and credit cards, will generally have a higher credit score then someone whose only credit consists of mostly finance companies.
At Summit CPA we offer multiple resources to assist you with all of your financial needs, For more tips, contact us at (866) 497-9761.