What is a Credit Score & How to Improve It.
There’s a lot of confusion around what a “good” credit score is. The range is 300 to 850. Generally, anything higher than 700 is considered good. If you have a score of 759 and higher, you are the lucky few in the “excellent” category according to FICO (Fair Isaac and Company).
FICO has been around since 1956 and provides data analytics (credit scoring) to lenders to help them make decisions regarding financing. Your FICO score determines your credit worthiness – basically if you will be approved or denied for a loan. The higher your credit score is, the lower of a risk you are to a creditor and you will receive a better interest rate compared to someone with a lower credit score.
Different scores, what does that mean?
You can have different scores from different credit bureaus. The three major credit bureaus are Equifax, Experian and TransUnion. Credit information may be supplied to one credit bureau, and not the other and therefore there will be differences in each credit bureaus’ report.
What factors determine my score?
Payment history, recent credit card usage, length of credit history, credit account types and derogatory marks influence your score.
What is considered a derogatory mark?
A derogatory mark is a negative record on your report. They stay on your report for seven years or more. Derogatory marks include:
- A Civil Lawsuit that requires payment of damages
- Tax Liens
- Delinquent payments
Here’s what you can do to improve your credit score:
- Check your credit reports to see what your score is on each and make sure it does not contain any errors. If there are late payments incorrectly listed, dispute them with the credit bureau.
- Make on time payments. Make a list of when your payments are due, and add a calendar reminder a week or two before they are due so you can submit payments on time. Some banks offer payment reminders. Setting up a payment reminder so you receive an email or text message before the payment is due will also help to ensure your payments are received on time.
- Lower your debt. Pay off debt by setting up a payment plan and sticking to it. Pay off high interest loans first while making the minimum payment on the other loans.
- Do not apply for credit that you do not need. If you are constantly applying for credit cards and other loans, each application shows up as an inquiry on your credit report. Inquiries are reported to credit bureaus which may appear that you are not managing your credit responsibly.
- Keep your credit accounts active and open. The amount of time you have an open line of credit will improve your score. As long as you are keeping the account in good standing and using it at least once a year, it will boost your score.
- Make more than the minimum payment due. Even better? Pay the statement balance on credit cards in full each month.
- Pay your rent on time with Progress Residential®. We report positive rental payment data to Experian® Rent Bureau. Just one more reason to pay your rent on time!
For more information, visit the Fico website.