Important Information You Must Know about Credit Scores

Every person who goes online, watches TV or even listens to the radio knows the importance of having a good credit score. You cannot enjoy any form of media these days without finding advertisements to help you get your credit report, find out your credit score or even promising to help you fix a low credit rating. The fact is, though, that there are still millions of people out there who have basic questions about their credit scores. To help answer some of the most common questions that people should know the answers to, we have put together this article. So buckle up, get ready to take notes, and find out the answers to these important questions right now…
What are the factors that make up a credit score?
There are five things that credit reporting bureaus take into consideration when calculating a person’s credit score. Here they are in order of importance – payment history, credit utilization, the average age of a line of credit, mixture of different types of accounts and inquiries on your credit report. Each is pretty self-explanatory, and credit bureaus use them all to calculate your credit score.
Are credit scores and credit reports the same thing?
Your credit score is calculated with the information we just told you about. All of this information is obtained from your actual credit report. This report provides the details about your credit application history, payment history, debt collection actions, public records and bankruptcies that may have been filed for.
Does checking your credit score hurt your credit?
A hard inquiry is when a lender looks at your credit when you apply for a loan. Those types of inquiries have a negative effect on your score. When you check your credit score, you are not doing any damage at all. In fact, it is good practice to stay on top of this important financial metric throughout the year.
Can you really get free credit scores and reports?
There are laws in place that entitle you to get one free copy of your credit report each year. You are allowed to get information form the three major credit reporting bureaus – Experian, Equifax and TransUnion. There are lots of websites and online resources to help you obtain your free, yearly report. Don’t get suckered into paying for what you can get for free, though.
Are all credit scores the same?
There are different credit reporting bureaus that each use their own set of calculations to come up with your score. For example, if you have a 650 FICO credit score that does not necessarily mean that your score will be the same if you check with other credit reporting bureaus.
Can a low credit score really be that bad?
If you have a low credit score, you will probably pay more in interest rates over the years on loans and credit cards. In fact, there are even online calculators that can be used to show you exactly how much money a low credit score can cost you over the years.
There is no way to cover everything you need to know about credit reports in a single post. However, the information we just shared with you is vital and it should prove helpful to get you moving in the right direction when it comes to your credit score and your credit report. Don’t minimize just how important your credit score is. Be proactive. Pull your credit report regularly. And do what you need to in order to get your credit score as high as you can.