Credit scoring is used by a financial institution to determine the risk of a loan. It is also used by some insurance companies to determine premiums. Credit scores range from 300 to 850. The higher the score, the lower the risk.
Every consumer should request a credit report annually from one of three credit bureaus and check it for errors. When problems are not resolved, it can cost you money. The three credit bureaus are:
· Equifax, 1-800-525-6285, www.equifax.com
· Experian, 1-888-397-3724, www.experian.com
· TransUnion, 1-800-680-7289, www.transunion.com
What makes up a credit score?
Payment history. Do you pay on time or are you running 30, 60, 90 days behind? It pays to pay on time. Other factors are capacity (available credit), length of credit, accumulation of debt in the last 12-18 months (number of inquiries and opening dates), and mix of credit (installment/revolving and number of finance company loans). The more finance company loans there are, the lower the score.
What hurts the score?
Missing payments, late payments, "maxed out" credit lines, excessive shopping for credit, opening numerous accounts in a short period of time, having more revolving loans in relation to installment loans, and borrowing from finance companies.
What doesn't affect the score?
Debt ratio, income, length of residence, or length of employment.
How do you improve your score?
Pay down on credit cards, make payments on time, slow down on opening new accounts, acquire a solid credit history with years of experience, and move revolving debt to installment debt.
If you obtain a copy of your credit report and need help reading it, just give Compass Credit Union a call at 342-5300. We would be happy to assist you. If you're thinking of consolidating and have equity in your home, ask for one of our loan officers.
Visit www.annualcreditreport.com for a free report which you are entitled to once per year. This central site allows you to request a free credit file disclosure, commonly called a credit report, once every 12 months from each of the nationwide consumer credit reporting companies listed above.