Sometimes I hear friends and family use credit reports and credit scores interchangeably. While they are definitely related, there are differences. I want to share how you can improve your credit report and how your credit score is determined.
Why is it important to be familiar with them? If you plan on getting mortgage, having a car loan, or even are shopping for car insurance, your credit report and score will most likely be checked. You want to have the best record you can have to get the best interest rate and deals.
Your Credit Reports
Your credit report is basically a record of your history of payments and helps lenders determine your credit worthiness. You technically have 3 credit reports, one with each credit bureau.
Credit Agency Contact Numbers
- Equifax: (800) 685-1111
- Experian: (888) 397-3742
- TransUnion: (800) 888-4213
In theory, they should have the same information, but sometimes you can have inaccuracies in any or all of them.
Get Free Credit Reports
The Federal Trade Commission has one site where you can really get your credit reports for free at annualcreditreport.com. If you do not have Internet access, you can also call 1-877-322-8228 to order your credit reports.
You should at least see if there are any mistakes on your credit report and fix them, as they can lower your credit score or put you in a bad light with lenders.
Your Credit Scores
Your credit score is a number between 300-850 that each of the credit agencies assign based on the information on your credit report. I wouldn’t get too hung up on credit scores, as leach bureau has their own little system. I would just shoot for 720 or higher.
By the way, you can’t get your credit scores with the Annual Credit Report site. They are completely separate. You can either buy your score from the credit agencies or you can use a service like myFICO.
If you want a general idea of your credit score, you may want to check out Credit Karma. It was in the ballpark when I tested it out.
Fixing Your Credit Score
While we don’t exactlyhow Fair Issac calculates your score, we do know what factors they take into account. Here’s how your score is broken down:
- 35% – Paying your bills on time: If you’re late with your payments, not only can you get a late fee charged to you, but after 30 days, it ges reported to the credit bureaus.
- 30% – Debt you owe and the amount of available credit: This measure how much of your lines of credit you are using. If you only have a $200 balance on a $1500 card, that’s better credit score-wise than having $200 balance on a $500 card.
- 15% – Your credit history length: This is basically keeping track of how long you’ve had your accounts. If you’re a new credit card holder, this will naturally improve the longer you have a solid history.
- 10% – New credit applications: A small part of your score is determined by how many accounts you’ve opened up recently.
- 10% -Different Types of Credit: I’m not crazy about this since it encourages several different types of debts. I think the less you have, the better. A mortgage and or a student loan already seems like more than enough debt.
It does take some time for improve your score, but it’s completely doable.
Your Thoughts on Credit Scores and Reports
Have you checked your credit reports recently?