Things You Should Know About Credit Scores

 

So you've got a credit score of 690, which is good, not very good or excellent, just good. Credit companies all over America find a credit score of 690 as good, 700-750 as very good, and above that as excellent. The median score in America is around 725.

 

These figures might be raising more questions than providing answers for you. Before you get more baffled, bewildered or confused here are 10 things you should know about credit scores.

 

1. Credit companies determine the kind of credit risk you are by using credit scores. The higher your credit score is, the lesser risk they consider you. The lower your credit score is the higher the risk category you get yourself into. Credit companies prefer lower risk clients to protect their investments.

 

2. Credit scores are determined by credit bureaus, not the government. Credit bureaus collect information about you to make credit reports. The information on the credit report is then be used to determine your credit score. These credit bureaus make a profit by selling your credit score to credit companies, so that they can make a quick and painless determination of whether or not to lend you money, and at what interest rate.

 

3. The government has recognized the importance of credit scores to credit companies. The credit scores have helped the credit companies determine potential clients. The credit companies have increased their investment significantly with the introduction of the credit ratings system. With the boost in their investments these companies have helped the economy quite significantly. Furthermore, the government has created the Fair Credit Reporting Act to protect you and the credit bureaus against unlawful information and use of your credit report and credit score.

 

4. Information such as payment history on credit cards, loan installments and mortgages, current loans, length of credit history, new credit, type of credit, employment history and residence are the main factors in determining your credit score.

 

5. Credit scores are not permanent. If you have an awful credit score, don't despair. You can have your credit score improved. There are several ways of doing this like eliminating incorrect negative entries in your credit report and paying your loans regularly.

 

6. The law provides you free access to your credit report annually. When you are denied credit you may also ask for a credit report for free.

 

7. Closing accounts does not improve your credit score. The available credit versus balances ratio would grow bigger and your credit history would also seem shorter, both end results might damage your score.

 

8. Credit scores and credit reports may not accurately and completely reflect information about your credit. Every year there are thousands of instances when consumers found erroneous entries in their credit report causing lower credit scores. Calling the attention of the credit bureaus on this matter can help resolve this problem.