The Importance Of Your Credit Score

Your credit score is composed of three digits and is also known as a FICO score. The credit scale runs from 300-850; and your score is the primary way lenders decide whether you are a good credit risk, when it comes to loans, insurance, etc.

The score is calculated using a set of mathematical equations in which four sections of your credit history is weighed using the following criteria:

• Payment history: 35%
• Outstanding debt: 30%
• Length of Credit History : 15%
• Types of credit used: 10%
  

High interest rates and other credit related issues occur when your score falls below 650. If this happens, cleaning up your credit is a necessity. To clean up your credit and raise your FICO score, you need to work with the bureaus to remove all inaccuracies, make remaining monthly payments on time, and pay off all outstanding debts accumulated. Your score can be raised significantly if you make timely payments for one year. Once your score is raised, you are able to prove to lenders that you are a good credit risk, and increase your chances of getting mortgage or auto loans.

What's On Your Credit Report:

Your credit report has five types of information about you, both private and public.

• Personal Identification Information: Your Credit report lists your name, Social Security number, and all addresses current and previously held.
• Information of Public Record: The report lists financial information that is a matter of public record including foreclosures, check garnishments, tax liens, and bankruptcies.
• Inquiries: Your credit report lists the names of companies or individuals who have made inquires concerning your credit file and the date they requested the data. The Inquiries section of your credit report also specifies if the request was to review an open account, or if it was to help the petitioner make a decision regarding a future credit relationship
• Collection Information: Includes information collection agencies report concerning credit account debts
• Trade Line Information: Information creditors and lenders regarding all loans, leases, or other debt past and present.

The problem is that almost 74% of all credit reports contain inaccurate information of some kind. These credit report blemishes are inadvertently costing consumers 10’s of thousands of dollars in interest fees paid to creditors of all kinds (including credit card interest fees, mortgage interest fees, automobile loan interest fees and more). And to make matters even worse, some consumers are losing thousands in lost wages due to employer scrunity. It is important that you keep a close eye on your credit report and be proactive in eliminating your report of future credit problems. Don’t forget, your financial health depends on it!