There are three companies, Equifax, Experian, and the TransUnion, who collect data about our credit history and compile that data into what is called our credit score. The credit scores that you will see when you check any of these three companies is only a snapshot of your score for that day, as the score changes all of the time.
Our credit score is used by lending institutions as a means of judging our credit worthiness. If you are going to buy a house, purchase a car, rent and apartment, apply for insurance, or apply for a job, your credit score can be a factor as to whether you are successful in any of these endeavors.
Roughly two-thirds of the score falls into categories in which you control such as paying your bills on time and keeping the amount that you owe at a low debt level. If you can concentrate on these areas, you will be able to affect most of your score. The areas that are out of your immediate control are past situations such as the number of credit applications you have had, history, the credit mix, and so forth will just take the time to get off of your report, whether they are negative or positive.
Lenders are tightening up on the credit that they will allow by requiring that consumers show higher credit scores. To receive the best interest rates, the ideal score used to be in the 720 range, and it has now been raised to 740. The minimum score required by Fannie Mae, the giant government mortgage company, has raised the minimum score from 580 to 620.
To find your credit score, you can go to a free credit site. Some of them are free for a certain length of time, say for seven days or 14 days, and then they start charging you a monthly fee. So this will be free to you if you can get your credit report, and then cancel your subscription.
There is another site called CreditKarma which is totally free without having to remember to cancel it, and the score is based upon one of the credit reporting companies. Be aware, however, that the site will more than likely attempt to market different products to you, but that is the price for having a free site.
By finding out what your credit score is, you will be able to begin to take action to improve your score. The advantage of some of the sites that require a monthly subscription, such as freecreditreport.com is that they will monitor your credit score for all three reporting agencies, and as you improve your credit score, your will be able to see the progress that your are making. They also have helpful suggestions along the way that will help you to accomplish this task of improving your scores.
The thing to do when you see your credit report is first to understand it. When you see all of the items that are listed, you may think, “Oh yes, I do remember that loan that I couldn’t pay off, so that is what happened to it.”
Your objective, once you have your score, is to check and be sure that all of the items that are listed are your items. Sometimes a person’s credit gets hijacked, and you will want to write to the reporting agency and get that corrected. Also, check for items that you did get paid off, but are not reported as such, and you can correct that as well. Any bankruptcies and foreclosures will stay on your credit report from 7 to 10 years, but once the time passes they will no longer be a factor.
You can periodically get new free reports as you begin to get new credit and pay it off successfully, thus gradually raising your credit scores. Get a major credit card and start using it, of if you can’t qualify to get a secured credit card where you put up a sum of cash against the potential use of the card.
These are ways to get your credit started back towards a positive direction, and you will need to know your scores along the way.