Get Your Free Credit Score
These days the most influential document that is affecting your finances is your credit report. The details contained therein dictate to your current and potential creditors how risky you may be to extend future credit to. It is paramount that you make every effort to stay on top of your credit report, or it will cost you big. Today’s economic credit crunch is drying up borrowing opportunities in nearly every place it was once given out freely.
For this reason alone, credit providers are able to be much more selective in whom they deem fit to take a loan. Credit card companies are even raising interest rates on existing customers or lowering their available credit limits. This is being done everyday here in America, and those with damaged credit reports are feeling the pinch first and the most significantly. By finding out what is contained in your credit report, you can start looking at ways to improve your credit profile and avoid these costly credit problems.
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Free credit reports are now available to every citizen in the United States provided for by the Free Credit Reporting Act (FCRA). This law obliges the major credit reporting bureaus, Experian, TransUnion, and Equifax, to provide copies of consumer’s credit reports free of charge. The reports are offered on a once-annual basis, but the request must be made by the consumer themselves. To get your credit report the process has, thankfully, been simplified to aid credit report access to all. Simply contact the three major credit reporting bureaus via phone, website or mail.
Credit scores are the mathematical representation of the data contained in your credit report, plain and simple. The FICO, or Fair Isaac Corporation, may seem more complex than it is, but in reality it has a fairly simple percentage-based system to calculate your credit score.
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While the system for calculating your credit score is not wholly publicized, the make up of your credit score is:
35% of your score is made up of how you pay your bills. If you pay your bills on-time, late, or not at all, this information has a massive impact on your overall score.
- 30% of your score is determined based on how much available credit you have. The system is looking to see how much of your credit you rely on to live. People who tend to use all the credit made available to them tend also to be poor credit risks. If however you are only using 10-25% of the total credit you have access to, your score will benefit substantially.
- 15% of your score is made up of the length of your credit history. If you started early with a student credit card or your parents started an account in your name as a minor, you are going to have a significant advantage over your peers. The longer the credit history you possess, the better for your score.
- 10% of your score is your credit mix. Meaning lenders like to see that you have a little variety in your credit life. Having multiple means of credit, such as some revolving credit card accounts, a vehicle loan, mortgage, etc. is much more advantageous than just a single credit source.
- 10% of you score is based on inquiries into your credit report made by people other than you. Inquiries, especially when they are significant in amount and frequency, tend to negatively impact your credit score. This is because these inquiries look to the FICO credit score system that you are credit shopping, looking to get as much loaned money as possible. A sure fire indicator of a poor credit risk.
Final Word on Credit Scores and Reports
These percentages all combine to give you your final credit score. This score is available through all the credit reporting bureaus, but it will cost you. The bureaus while obligated to give you a free credit report copy each year, do not have to supply you with the number. If you want your actual credit score, contact the bureaus or 3rd party online credit score companies and request it. More importantly, pay attention to the reasons your credit score is impacted, both good and bad, and keep on top of your credit report. A good credit report means a good credit score, every time.