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Credit Scores

The document discusses understanding your credit score and how it is calculated. It explains that credit scores are estimates of how likely you are to repay loans and are used by lenders, with higher scores making it easier to qualify for loans or get lower interest rates. It also discusses factors that affect your credit score and how to improve it by paying bills on time, keeping credit utilization low, and maintaining a long credit history.

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14 views2 pages

Credit Scores

The document discusses understanding your credit score and how it is calculated. It explains that credit scores are estimates of how likely you are to repay loans and are used by lenders, with higher scores making it easier to qualify for loans or get lower interest rates. It also discusses factors that affect your credit score and how to improve it by paying bills on time, keeping credit utilization low, and maintaining a long credit history.

Uploaded by

sh1696394
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Understand your credit score

Banks, credit card companies and


other businesses use credit scores
to estimate how likely you are to
pay back money you borrow.
A higher score makes it easier to qualify for a loan or
lower interest rates. Many scores range from 300-
850, but different companies use different ranges.

You have many credit scores


You can have more than one score, because:

§§ Lenders use different scores for


different products. Several variables affect your credit score:
§§ There are many different credit scoring formulas. §§ How many credit accounts you have

§§ Information can come from different credit §§ How long you’ve had those accounts
reporting sources. §§ How close you are to your credit limit
§§ How much credit you have left
For example, your credit card score could be different
from your home loan score, and the scores you §§ How often your payments have been late
purchase online could be different from both of those. §§ Other factors

For some people, these differences aren’t that big.


How to raise your score
But because lenders use different scores, you might
qualify for lower rates with one lender and not §§ Pay your bills on time, every time. One way to
another. It can pay to shop around. make sure your payments are on time is to set
up automatic payments, or set up electronic
reminders. If you have missed payments, get
Where do credit scores come from? current and stay current.
Your credit scores are generally based on information §§ Don’t get close to your credit limit. Credit scoring
in your credit reports. This information is reported models look at how close you are to being “maxed
by your creditors to credit reporting companies. The out,” so try to keep your balances low in proportion
three biggest are Equifax, Experian and TransUnion. to your overall credit limit. Experts advise keeping
your use of credit at no more than 30 percent of
your total credit limit.

Consumer Financial
Protection Bureau Learn more at consumerfinance.gov. 1 of 2
§§ A long credit history will help your score. Credit §§ Accounts you closed that are listed as open.
scores are based on experience over time. Your
§§ The same item showing up more than once (like
score will improve the longer you have credit,
an unpaid debt).
open different types of accounts, and pay back
what you owe on time.

§§ Be careful closing accounts. If you close some How to fix mistakes


credit card accounts and put most or all of If you find something wrong in your credit report,
your credit card balances onto one card, it may you may contact both the credit reporting company
hurt your credit score if you are using a high and the creditor that provided the information.
percentage of your total credit limit. Frequently Explain what you think is wrong and why. Include
opening accounts and transferring balances can copies of documents that support your dispute.
hurt your score too.
Your credit reports will come with instructions on
§§ Only apply for credit you need. Credit scores
how to dispute mistakes.
look at your recent credit activity as an indicator
of your need for credit. If you apply for a lot of
credit over a short period of time, it may appear
that your economic circumstances have changed Submit a complaint
for the worse.
If you have a credit reporting problem, you
can submit a complaint:
Your credit report matters as much
as your score  Online
consumerfinance.gov/complaint
Mistakes in your credit reports could hurt your
credit history and credit score, so check them  By mail
regularly. You can get one free credit report from Consumer Financial Protection Bureau
each of the big three credit reporting companies P.O. Box 4503
every 12 months. Go to annualcreditreport.com or Iowa City, Iowa 52244
call 877-322-8228.
We’ll forward your complaint to the
When you get your report, look for: company and work to get a response from
§§ Mistakes in your name, phone number, them. You will receive email updates along
or address. the way and can track the status of your
complaint online.
§§ Loans, credit cards, or other accounts that are
not yours.

§§ Reports saying you paid late when you paid


on time.

Consumer Financial
Protection Bureau Learn more at consumerfinance.gov. 2 of 2

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