Getting a Free Credit Scores Report is the first step to protect and improve your credit score. Under the current economic condition, everybody’s credit rating is at risk, and even if you think you have a good credit score, you might be in for an unpleasant shock.

What are contained in your credit report?

Let’s look at what are shown in the credit report. It contains four parts basically which are 1. Your personal details 2. Your credit history, 3. public records that reflect your credit and financial stability 4. inquiries made by third parties about your credit record. All these are carefully examined by you potential lenders which in return determine your lending rate.

So, your free credit scores report is a record of your credit history and financial stability. It includes financial details such as mortgages, loans, credit cards, banking facilities and so on. Also, it includes your repayment history, any late payments, missed payments, etc. The credit report also show any details of credit or loan applications you have made, and if the application is successful or not.

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Who maintain your credit report?

In United States there are three large agencies that work with the government to maintain your credit reports and distribute to banks and lending agencies. They are Experian, Equifax and TransUnion. Your credit scores and ratings are used by businesses and firms to determine if it is safe for them to lend money.

How your credit score are calculated?

When calculate your credit score the following factors are taken in account. Please note that they are in different weighting, and your payment history is always the most significant one.

35% is based on Payment History – This means late payments and charge-offs. They look at the recency (how recent was this issues), the frequency (how often did you pay late payments) and the severity (how many days late). Typically, any payments 30 days or more late will show up on your report.

30% is based on How much you owe vs. How much is available to you.

15% is based on Length of History. Typically the longer you had credit the better.

10% is based Last Application for Credit. Opening many new accounts in a recent period of time can damage your score.

10% is based on types of credit you use. Variety (eg. auto loan, personal loans, credit cards) is best, but remember the last bullet. For the highest score, your report would include revolving and installment debt. Major credit bards are better than department store cards.

Equifax, Experion, and TransUnion adopt slightly different algorithms when calculating your credit score which is why you will see a difference between the reports.

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How to interprete your credit scores?

You should understand that your credit scores are calculated individually by the three agencies and your scores may not be the same due to variation of your credit history with different agencies. Below is the interpretation of different credit score range.

720-850 – Excellent – The best score range and best financing terms.
700-719 – Very Good – Qualifies a person for favorable financing.
675-699 – Average – A good credit score that qualify for most loans.
620-674 – Sub-prime – May still qualify, but will pay higher interest.
560-619 – Risky – Have trouble obtaining a loan.
500-559 – Very Risky – Need to work on improving your rating.
Interest rates generally rise along with a lenders risk factor. Overall, people with the highest credit scores receive the best financing, while those that fall below the average will generally only qualify for sub-prime loans with higher interest rates.

What is the implication of bad credit report?

If your credit report is bad, you will either not be offered credit or will have to pay a higher interest rate than those with a good credit report. In some cases you will be refused credit. For instance, you will not able to get a credit card. Therefore, it is important to know about your credit report details.

The implications of a bad credit report include you being refused a credit card application, a loan, a mortgage, a car loan and any other form of credit. You could even be refused a mail order agreement or even a car hire. That is not the end of it, because the same could apply to your partner and your children if they reside at the same address as you. When your kids look for a mortgage of their own before being married, or seek a loan for their first car, they could be refused because of your poor credit record.

How to improve your credit score?

1. Pay your bills on time. It is the first and also the most important tips to increase your credit score. Although it seems really simple and obvious, many people have underestimated the importance. What lenders want to know is how timely you settle your bills in the past. That’s why 35% of the credit score is based on your credit history. Late payments and collections can severely hurt your score. Be reminded that the more recent your payment problems are the worse.

2. Keep your credit card balances low. High outstanding debt can lower your credit score. Instead of having one card close to being maxed out, transfer the balance from this card to a few other cards, so you can keep your credit card balances at or below 25% of your credit limits. Paying off debt is even a better way to increase credit score, if possible.

3. Do not close paid-off accounts. Closing old accounts reduces your total available credit and thus changes your utilization ratio, in turn may lower your score. Closing your oldest credit accounts shortens your credit history and will which make you seem less credit worthy.

4. Get a small loan. You need to build up your credit history to get a big loan later. If you have little or no credit score and you just don’t use credit cards, acquiring debt can be a quick way to start raising your credit score. If you have no debt, how can you show the potential lenders that you are a good borrower? Of course, use this method of building credit score wisely and don’t let yourself ruin by excessive debt..

5. Do your interest shopping within two-week periods. Your credit score is lowered by 3 points each time you apply for a loan and the lender accesses your credit report. When trying to find the best interest rate for a loan, keep your loan processes within a focused period of time. This way, all your credit report inquiries are accumulated and will be treated as one single request, when your credit score is calculated.

View your Free Credit Scores Report, click here!

Get Your Free Credit Report Online

To start monitoring and build up your credit score, the first step is to get your free credit report.

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