3 Things to Know about Credit Scores

Credit scores mean a lot. Not only does your credit score play a major role in being approved for a credit card, auto loan, or home mortgage, a good credit score can help you land a job or a good deal on an apartment. Yes, employers and landlords look at credit scores. Ironically, many people never actually look at their own credit score or take steps to improve it. And amazingly, even though everyone with a financial history has a credit score, a significant number of them know very little about the importance of a good credit score.

Credit Scores are Broken into Different Categories

A credit score takes into account numerous different aspects of your financial background. Everything from how much you currently owe to your payment history factor into the result. All this is reflected on a credit report that tabulates the score.

Not every component of the credit report’s credit score pie chart come with equal value, though. Payment history and amounts owed count for 35% and 30% respectively. Newly opened credit accounts count for 10%, your mix of credit counts for 10%, and length of credit history equals 15%.

You could do very well in all the areas but one. That one trouble spot could bring down your score. Take this as a reason why you should check out your credit report at least once annually. The credit report provides the detailed breakdown of your positives and deficiencies. Upon learning about the deficiencies, you can take steps to fix the negatives.

Inaccurate Information May Exist

Mistakes happen. They can even happen when data is logged on your credit score. If you don’t know the error exists, then you remain blissfully unaware of the damage the inaccuracy causes. Once again, reviewing a credit report once a year becomes vital for those wishing to care for their financial well-being.

Although the discovery of inaccurate information can be angering, solutions exist. You can request the person who reported the false information remove it. If he/she won’t, an appeal process exists to address the situation.

Negative Information has a Shelf Life

Negative info on your credit report won’t stay on the report forever. A statute of limitations of sorts exist for negative marks. Specifically, the negative information disappears after seven years. Bankruptcy filings, however, are excluded from this seven year period. With a bankruptcy, negative information lasts 10 years.

Sometimes, the only thing you can do about negative information on your credit report is to wait it out. Being proactive and taking steps to fix a credit score should always be a top priority. If you run into trouble improving the score through your own actions, at least waiting out the seven-year period works in your favor. Just don’t add any new negative information to the report and start the clock over.