A credit score is a number lenders use to help them decide: \u201cIf I give this person a loan or\u00a0credit card, how likely is it I will get paid back on time?\u201d \u00a0The score is generated through\u00a0statistical models using elements from your credit report. However, your score is not\u00a0physically stored as part of your credit history on the credit file. \u00a0Rather, it is typically\u00a0generated at the time a lender requests your credit report, and then included as part of the\u00a0report.<\/p>\n
Three major credit reporting agencies create your credit score. \u00a0Because your credit report\u00a0is animportant part of many credit scoring systems, it is very important to make sure it is\u00a0accurate before you submit a credit application. \u00a0To get copies of your report, contact the\u00a0three major credit reporting agencies:<\/p>\n
\u2022 Equifax \u2013 (800) 685-1111 \u00a0(FICO\/Beacon Score)<\/p>\n
\u2022 Experian \u2013 (888) 397-3742 \u00a0(Experian Score)<\/p>\n
\u2022 TransUnion \u2013 (800) 916-8800 \u00a0(TransUnion Score)<\/p>\n
How Scores are Calculated<\/p>\n
Designers of credit scoring models review a set of consumers \u2013 often over a million \u2013 who\u00a0opened loans at the same time, and determine who paid their loans and who did not. \u00a0The\u00a0credit profiles of the consumers who defaulted on the loans are examined to identify\u00a0common variables \u00a0exhibited at the time they applied for the loans. \u00a0The designers then\u00a0build statistical models that assign weights to each variable, and these variables are\u00a0combined to create a credit score.<\/p>\n
What is in a Credit Bureau Score?<\/p>\n
The information that impacts a credit score varies depending on the score being used.\u00a0Credit scores are only affected by elements in your credit report, such as:<\/p>\n
\u2022 Number and severity of late payments<\/p>\n
\u2022 Type, number and age of accounts<\/p>\n
\u2022 Total debt<\/p>\n
\u2022 Recent inquiries<\/p>\n
If the business card\/corporate card or gas card does not appear on your credit report, it\u00a0will not affect your score.<\/p>\n
What\u2019s Not in a Credit Bureau Score?<\/p>\n
Credit bureau-based scores, like those generated by Experian, cannot use demographics\u00a0prohibited under the Equal Credit Opportunity Act, such as race, color, religion, national\u00a0origin, gender, age, marital status, receipt of public assistance, or exercise of rights under\u00a0the Consumer Credit Protection Act.<\/p>\n
Why Lenders Use Credit Scores<\/p>\n
Credit scores help lenders assess risk more fairly because they are consistent and\u00a0objective.\u00a0 Consumers also benefit from this method.\u00a0 No matter who you are as a person,\u00a0your credit score only reflects your likelihood to repay debt responsibly, based on your\u00a0past credit history and current credit status.<\/p>\n
Credit Score Factors<\/p>\n
Score factors are the elements from your credit report that drive your credit score.\u00a0 For\u00a0example, such elements as your total debt, types of accounts, number of late payments\u00a0and age of accounts are what determine the outcome of your credit score.\u00a0 Score factors\u00a0can have a positive or negative affect on your credit score.<\/p>\n
Factors with the Most Significant Impact to a Credit Score<\/p>\n
Paying your bills on time is the single most important contributor to a good credit score.\u00a0Even if the debt you owe is a small amount, it is crucial that you make payments on time.\u00a0In addition, you may want to minimize outstanding debt, avoid overextending yourself\u00a0and avoid applying for credit needlessly.\u00a0 Applications for credit show up as inquiries on\u00a0your credit report, indicating to lenders that you may be taking on new debt.\u00a0 You may\u00a0want to use the credit you already have to prove your ongoing ability to manage credit\u00a0responsibly.<\/p>\n
If you do have negative information on your credit report, such as late payments, a public\u00a0record item (e.g., bankruptcy), or too many inquiries, your best strategy may be to pay\u00a0your bills and wait.\u00a0 Time is often your best ally in improving credit.<\/p>\n
Improving Your Credit Score<\/p>\n
Scores reflect credit payment patterns over time with more emphasis on recent\u00a0information.\u00a0 In general, a score may improve if you:<\/p>\n
\u2022 Pay your bills on time.\u00a0 Delinquent payments and collections can have a major\u00a0negative impact on a score.<\/p>\n
\u2022 Keep balances low on credit cards and other \u201crevolving credit.\u201d\u00a0 High outstanding\u00a0debt can affect a score.<\/p>\n
\u2022 Apply for and open new credit accounts only as needed.\u00a0 Do not open accounts\u00a0just to have a better credit mix \u2013 it probably will not raise your score.<\/p>\n
\u2022 Pay off debt rather than move it around.\u00a0 Do not close unused cards as a short-term strategy to raise your score.\u00a0 Owing the same amount but having fewer open\u00a0accounts may lower your score.<\/p>\n
Also, make sure the information in your credit report is correct.\u00a0 It will not affect your\u00a0score to request and check your own credit report.\u00a0 If you find errors, contact the\u00a0consumer reporting agency and your lender.<\/p>\n
How Long Does it Take to Rebuild a Score?<\/p>\n
The length of time to rebuild your score after a decrease depends on the reason behind the\u00a0drop in the score.\u00a0 Most decreases in scores are due to the addition of a new element to\u00a0your credit report such as a delinquency or an inquiry.\u00a0 These new elements will continue\u00a0to affect your score until they reach a certain age.\u00a0 Delinquencies remain on your credit\u00a0report for seven years, although some bankruptcies may remain for 10 years and unpaid\u00a0tax liens remain for 15 years.\u00a0 Inquiries remain on your report for two years.<\/p>\n
What Happens if you are Denied Credit or do not get the Terms you Want?<\/p>\n
If you are denied credit, the Equal Credit Opportunity Act requires that the creditor give\u00a0you a notice telling you the specific reasons your application was rejected. You have the\u00a0right to learn the reasons if you ask within 60 days.\u00a0 Indefinite and vague reasons for\u00a0denial are illegal, ask the creditor to be specific.<\/p>\n
Credit scoring systems consider updated information and change over time.\u00a0 Sometimes,\u00a0you can be denied credit because of information from a credit report.\u00a0 If so, the Fair\u00a0Credit Reporting Act requires the creditor to give you the name, address, and phone\u00a0number of the credit reporting agency that supplied the information.\u00a0 You should contact\u00a0the agency to find out what your report said.\u00a0 This information is free if you request it\u00a0within 60 days of being turned down for credit.\u00a0 The credit reporting agency can tell you\u00a0what is in your report, but only the creditor can tell you why your application was denied.<\/p>\n
DMCC is a 501 (c)3 nonprofit organization committed to educating consumers on financial issues and providing personal assistance to consumers who have become overextended with debt.\u00a0 Education is provided free of charge to consumers, as well as personal counseling to identify the best options for the repayment of their debt. To speak to a certified credit counselor, call toll-free 866-618-3328 or email\u00a0<\/em>contact@dmcconline.org<\/em><\/a>.DMCC is located at 1330 SE 4th Ave, Suite F, Fort Lauderdale, FL 33316.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":" A credit score is a number lenders use to help them decide: \u201cIf I give this person a loan or\u00a0credit card, how likely is it I will get paid back on time?\u201d \u00a0<\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[16],"tags":[],"class_list":["post-238","post","type-post","status-publish","format-standard","hentry","category-credit"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p5shu1-3Q","_links":{"self":[{"href":"https:\/\/www.dmcccorp.org\/edu\/wp-json\/wp\/v2\/posts\/238","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.dmcccorp.org\/edu\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.dmcccorp.org\/edu\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.dmcccorp.org\/edu\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/www.dmcccorp.org\/edu\/wp-json\/wp\/v2\/comments?post=238"}],"version-history":[{"count":4,"href":"https:\/\/www.dmcccorp.org\/edu\/wp-json\/wp\/v2\/posts\/238\/revisions"}],"predecessor-version":[{"id":2005,"href":"https:\/\/www.dmcccorp.org\/edu\/wp-json\/wp\/v2\/posts\/238\/revisions\/2005"}],"wp:attachment":[{"href":"https:\/\/www.dmcccorp.org\/edu\/wp-json\/wp\/v2\/media?parent=238"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.dmcccorp.org\/edu\/wp-json\/wp\/v2\/categories?post=238"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.dmcccorp.org\/edu\/wp-json\/wp\/v2\/tags?post=238"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}