12 Little Known Facts About Your Credit Score
Everyone seems to have a different viewpoint on what affects your credit score and what doesn’t. Some of this is because the credit bureaus do not let their formula for computing credit scores become well known, while even more of it is due to companies or people trying to make money off of the misinformed. If you have questions about your credit, you’ll find these facts about your credit score interesting and informative.
80% of people have errors on their credit report. It’s important to check through your credit report to ensure everything is being reported accurately. If you haven’t done so, before making any changes to your credit you should always get your credit report to know where you stand.
Pulling your own credit report will NOT hurt your credit score. It’s true that credit inquiries count for ten percent of your credit score. However, you will never hurt your credit score by pulling your own credit report. You could pull it once a day for a year and your score would not be hurt.
You have more than one credit score. In fact you have three. Most lenders consider scores from the three major credit bureaus (TransUnion, Equifax, and Experian). Lenders will use the middle of the three scores in determining your credit worthiness. Because of this, you should monitor your report from each of the three bureaus.
Your credit score can affect your employability. 60 percent of employers check an applicant’s credit report at least some of the time.
Your salary doesn’t affect your credit score. You could be a housewife with no income or a millionaire. All that matters to the credit agencies is how responsible you are with the money you are borrowing, not how much of it you have or don’t have.
Late payments hurt your score, but your immediate credit history carries more weight. The credit-scoring models assume that your current behavior is a far more important indicator of your creditworthiness than your past behavior. Your current behavior, after all, can better forecast whether you are experiencing a downward financial turn. So while you may have an account in collection for over a year, a late payment on your mortgage this month will be more damaging.
Most of the time, late payments made before 30 days past due are not considered “past due” by the credit bureaus. While you will still incur a late payment fee from your creditor, most creditors will not report a late payment to the credit bureaus until you have gone past the 30 day billing cycle.
When applying for a loan as a couple, the lower of the two scores is used. This means that whoever’s FICO score is lowest will determine the interest rates on a mortgage for the couple.
Always use the same first, middle and last name when applying for credit. You may not think a small thing such as your middle initial can cause significant issues on your credit report, but it’s true. If your name is Robert Michael Jones, Jr., you shouldn’t apply as Bob M. Jones, Jr., or any of the other variations of your name. Pick one name and stick with it, or risk having your credit information divided among the various names. Worse yet, it could be merged with another person’s information. (For instance, if you are Robert Michael Jones, Jr., and your father is Robert Michael Jones, the credit bureaus might combine your files if you do not use “Jr.” when applying for credit.) That said, if you changed your last name upon marrying, start applying for credit under your new name. It might increase the likelihood of errors, but the damage will be temporary; the new last name is forever.
Your collection account history doesn’t stay on your report forever. Collection accounts only minimally hurt your credit after two years, and after four years, the damage is all but erased. After seven years, a collection account is wiped from your report.
There are credit cards for people with bad credit. If you have poor credit, you might not qualify for traditional credit card accounts. Instead, open a secured credit card. A secured credit card requires you to pay a deposit equal to or greater than the balance. Obviously secured credit cards do not come with the same privileges as regular credit cards, which allow you to buy now, pay later. With secured credit cards, you basically pay now, buy later, and then pay again. It might not sound like a great deal, but it will help you rebuild your credit so long as the credit card company reports to all three major credit bureaus—be sure to ask! After six to 12 months of timely payments, ask the company if it will refund your deposit and transform your secured credit card into a regular credit card.
Technology can help keep you in good standing. If you struggle to pay your bills on time because you are too busy, or because you do not manage your money well, try this: Sit down with a calendar and a copy of all your regular bills. Then create automatic payments on all your credit cards, mortgages, installment loans, and finance accounts. If you are a compulsive spender, this might help curb unnecessary expenditures by forcing you to pay the required bills each month.