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You see it nearly every day, use it just as often and you may even call it a “girl’s best friend.” What are we talking about? Your credit card.
Yet, while most women use credit cards, a survey by the Consumer Federation of America reports that most consumers don’t understand the intricacies behind credit scores. What should you know about your credit score?
Here is ENTITY’s collection of seven basic facts for every #WomanThatDoes:
Credit scores and credit reports sound similar, but they aren’t the same. According to Huffington Post, credit scores reveal how much of a “credit risk you are to issuers.” Credit scores are like grades – the higher the score, the better! Credit reports, on the other hand, include your credit and payment history, credit limits and money owed. Your credit score is calculated based on the information from your credit report.
To see your own credit scores, Credit.com states that you can use a variety of online sites (including Credit.com). As for your credit reports, you can legally request a free copy of your annual credit report from each of the three major credit reporting businesses listed below.
Huffington Post also states that credit scores range from 300-850 (the higher the better). To make matters a little more confusing, the range can vary based on the type of credit score. Three major credit bureaus exist (Equifax, Experian, and TransUnion), and each maintain separate credit scores and credit reports. As a result, a 700 credit score from one credit business may not be equivalent to a 700 credit score from another credit business. The key? Knowing the range of your credit score!
As Credit.com explains, your credit score is based on five factors: payment history (accounts for 35 percent of your score), amounts currently owed (30 percent), how long you’ve had credit (15 percent), types of credit (10 percent) and inquiries to receive credit (10 percent).
Even if you aren’t checking your credit report and scores, other people are! In particular, the Expert Beacon states that creditors, mortgage lenders, landlords, utility companies, student loan lenders, insurance companies, employers, government and collection agencies, and judgment creditors can see your credit report. What about your score? Since your credit score indicates how likely you are to repay your debt, your score can be checked by banks, credit card companies, auto dealers, retail stores and landlords.
Errors can happen, but you shouldn’t let them negatively impact your credit. A credit score article in The New York Times encourages you to regularly check your credit report for inaccuracies. Since your credit score is based on your credit report, errors could prevent you from borrowing money. If you notice a mistake, you can request a correction online (or through the mail) from the credit bureau that provided the report. Specifically, indicate the error and provide any supporting documentation. Credit bureaus are legally required to investigate, respond in writing , usually within 30 days, and provide a free credit report to show the changes.
The New York Times also suggests several ways to gain or maintain a good score. These include paying your bills on time, using the same credit card for an extended time, limiting your number of credit cards, keeping a low balance (one-third of your credit limit), and paying off your balance monthly.
As anxiety provoking as credit scores can be, remember that a bad score probably won’t last forever. VantageScore Solution examined 2 million consumers’ credit scores and found that in a three-month period, 49 percent saw a credit score increase, 30 percent saw a decrease and 21 percent maintained the same score. The main point? Credit scores are fluid and if you work to improve your credit score, you won’t be stuck with bad credit.
With these seven basic facts about your credit score in mind, be a powerful woman to take control of your credit – and your financial life!
