Financial Fitness: Credit Scores & Credit Reports

Your credit score is like a thermometer measuring the overall health of your credit worthiness. It can impact everything from your ability to get a loan or credit card to the terms of the loan/credit card. It can even impact approval for renting an apartment or getting a job. The score may seem disconnected from your day-to-day life but its health, or lack of, can definitely be felt in your wallet…check out this infographic to see how. 

Unlike the reading on a thermometer measuring your body’s temperature, you want your credit score to be as high as possible. Credit scores range from 300-850 and unfortunately it can take much longer to rehabilitate a poor score than it did to bring it down. Negative activity, such as a late payment, can stay on your credit report, affecting your credit score, for 7 years!

What’s the difference between a Credit Score and a Credit Report? The credit score is determined by a formula developed by FICO (Fair Isaacs Corporation) using the information found in your credit report. You generally need to purchase your credit score but you can obtain a free credit report once every 12 months. Watch this 2 minute video to learn more about how the credit score and credit report impact each other. 

The first step to addressing the health of your credit score is to get a credit report. There are three organizations that gather and report credit-related information: Experian, TransUnion, Equifax. While they all contain the same basic information, they can have slight but important variations. For this reason it is good to request a report from each agency. One way to take advantage of the free report once every 12 months is to stagger your request. Get your Experian report then four months later get your TransUnion report then four months later get your Equifax report…and repeat. Also, if you apply for a loan or credit card and are denied you are entitled to a free report.   

You have your credit report, now what? Look it over for any errors. Make sure that your personal information is correct and notify the credit bureau if there are any changes that need to be made. Make sure that the open accounts, payment history, and any potential negative items are accurate. If you believe any of this is in error you can dispute it. Each credit reporting bureau will give you information about how to do this and you can also check out  this article.

Unless your score is in the excellent range make a plan about how to bring that number up. Unsure how to do this? Check out these tips to repair and improve your credit score . If you are feeling swamped by debt and need help managing it consider working with a credit counselor. There are many companies that may take advantage your situation. Make sure you only use a credit counselor that is affiliated with either the National Foundation for Credit Counseling or the  Financial Counseling Association of America.

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