What is Your Credit Score?
Credit card companies and lenders rely on credit scores, which determine someone's chances to borrow money - and how favorable the terms will be. Scores range from 200 to above 800. Scores below 620 are considered risky; 720 and over are excellent.
There are five categories of scoring:- payment history (35%);
- amount owed (30%);
- length of credit history (15%);
- new credit (10%);
- and types of credit (10%).
It is a good idea to check your own score yearly by ordering reports from the three major credit scoring companies: Equifax (www.equifax.com), Experian (www.experian.com), and TransUnion (www.tuc.com).
And be sure to notify the credit bureau of any inaccuracies you find on your report, along with copies of documents that dispute incorrect entries. Close accounts not in use and request that late payments older than seven years be removed. Verify and update accounts and account numbers as well as your address and Social Security number.
To improve your score:
- Pay your bills on time.
- Reduce outstanding debt.
- Build up your savings.
- Don't fall for illegal schemes that help create a new credit identity.
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