Understanding Your Credit Scores
Every person in the United States will begin to have a credit score starting after their 18th birthday. At that time you can start to build your credit by using credit in wise manner. This is the beginning way of raising your credit score.
Your score won’t star at 0. It will start as being non-existent. Thereby, you can apply for credit or use a prepaid credit card to begin to build your credit history. Within a few months you should start seeing a score based on your credit history.
Then you may ask, “What is a credit score?”
A credit score is a measure of creditworthiness. This is determined by how you pay your debt, the age of that debt, and a few other factors.
The main idea is to always pay your bills on time and to not overleverage yourself. In this way, you are seen as a good credit risk and it would show other future banks or lenders that you have the financial wherewithal to be trusted with future loans or lines of credit.
The Big Three
When you are wanting to be raising your credit scores you must understand that there are three main credit repositories that will monitor your credit from the creditors you are using.
The three credit repositories are TransUnion, Equifax, and Experian. They each have their own mathematical formula that they use when calculating your score. Also, you will need to be aware that not all creditors report to all three repositories. Some do, but some may only report to one or two of them. And, there are companies that may not report to any of them.
The three repositories guidelines have also shifted over the last couple of decades to ensure everyone is created equal. This is due to a system called FICO which stands for the Fair Isaac Corporation. Thus when you are using your credit you may want to pay your free annual credit report to see who is reporting to what.
Note any differences between the three different repositories. See who is reporting to which ones and who is not.
One other way to help improve your credit is to check for any inaccuracies on your report. It has been said that approximately 79% of people will have at least one error on their report.
Your job is to find those errors. Check very carefully on anything that might be wrong.
I will often say is to assume there is at least one error and your job is to find it. Check the spelling of your name and current & previous addresses. Check for late payments and balances. Look for anything with each repository.
Be aware that the repositories don’t share their information with each other. If Experian has your name spelled one way and Equifax has it spelled another way they won’t talk to each other and try to correct it for you. You must do that it yourself.
The way to do this is through a process called a “dispute”. In these days and times, a dispute is normally accomplished on each repository’s website. If the inaccuracy is with more than one repository you will need to file the dispute with each repository that it may be with.
The process is relatively easy and should be done within a few minutes.
After you have filed the dispute online it may be 30 – 45 days before you hear back stating the inaccuracy has been updated.
If the dispute is against a creditor then they may come back saying the information was either correct originally or has been updated.
Now that you have a better understanding of your credit and you can be raising your credit scores, I will say that there are more ways to improve your scores. I have written a program called Personal Credit Creator that is designed for people who have challenged credit and want to find possible solutions that they could use.
Also, in Personal Credit Creator we go into other ways of finding new good debt items that will assist in raising your credit scores. This course is one of the many courses that we teach.