Your credit score is an important number in your life and it is important to know what it is and how it is calculated. This important number is an indicator of your creditworthiness and used in many aspects of your life, whether you realize it or not. Essentially it is looked at by those that have provided you credit and creditors that are considering offering you credit. They utilize the score to decide on the risk associated with them continuing to provide you credit or additional or new credit.
Credit scores can range from 300 to 850, the higher the score the better. There are three major reporting agencies, Experian, Equifax, and Transunion, which report, keep up to date, and maintain credit histories. These are the agencies that credit providers rely upon to determine if you are creditworthy or not. Your score is determined by five main factors which are your payment history, credit utilization, length of your credit history, the type of credit you have used, and the amount of new credit being inquired about. According to Experian, each of these criteria contributes to a portion of your score. Payment history contributes to 35%, credit utilization accounts for 30%, credit history makes up 15%, and the type of credit you have used and amount of new credit each account for 10% of your credit score.
It is important to make sure that the information being reported by the three credit bureaus is accurate and current. The information they maintain will be reviewed using the criteria above to determine your credit score. You will want to be sure that the information being used by the bureaus is accurate and if there is a discrepancy or something you do not believe to be accurate; you will want to contact the bureau with the inaccurate information and dispute it. Be prepared to have proof or substantiating evidence to show that what is being reported is inaccurate.
Knowing what your credit score is and how it is determined is the first step to making sure that you have great credit. We will be discussing why having good credit is important in a future article and Mitlin Minute. You now are aware of how your score is determined and you will want to pull a credit report to see if what is being reported about you is accurate and to see what your score is today. Everyone is entitled to a free credit report every year. This is something you should do each year to assure you know your score, confirm everything is accurate, and explore what can be done to raise your score; if you do not have an 850 score.
We would be happy to discuss your credit score with you and why it is important to review and understand your credit report. Just contact us, Mitlin Financial, at (844) 4-MITLIN x112 to schedule a time to discuss. Be sure to share this article with friends, family, and business acquaintances who might be interested too. We look forward to helping you, and them, get on the right path and stay there.
This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice. Investing involves risk, including possible loss of principal. No strategy assures success or protects against loss. To determine what may be appropriate for you, consult your financial advisor.