What Do You Know About Your Credit Score?

Did you know… all credit scores are not created equal? Your credit score and your credit report are two different things. Credit Reports are a detailed history of your use of credit over many years. A credi score is an aggregate of all that information reduced to a number.

A note of caution: The only truly free and safe source to obtain your credit report on line is through AnnualCreditReport.com

Your credit score can affect almost everything you do even employment. For our purposes you need to know that your credit score will undoubtedly have an affect on your mortgage interest rate when buying a home. The higher your score, the more likely you will get the best (or lowest) interest rate your mortgage lender has available.

When you apply for something like a cell phone plan, insurance or a car loan, your credit score is pulled most commonly from one of the three manor credit reporting agencies, Experian, Equifax or Trans Union. When you apply for a mortgage, your score is pulled, ususally through a third party service, from all three major reporting agencies. Oddly, though your credit history might appear to be the same with each of the three agencies, each of their resulting scores may be different. How does this happen? My best guess would be ‘nobody knows’, but in all seriousness, there are certain things that will, without a doubt, affect your credit score. The article below from RIS Media lays out a few things to look for when checking your credit report or evaluating your credit score.

How Much Do You Know About Your Credit Score?

By Barbara Pronin

While your credit score affects everything from your ability to buy a car or a home to how much interest you will pay on the loan, many people don’t know how these scores are calculated or what impacts them positively or negatively.

Moreover, says the Credit Federation of America (CFA), more than 25 percent of respondents in a recent survey did not know that a low credit score could increase the cost of a car loan by $5,000. More than half didn’t realize that utility companies, cellphone companies, and even insurers sometimes check credit scores before issuing services – or that multiple inquiries in a short time, as when you are shopping for a loan, are treated as one inquiry in order to minimize the impact on your score.

The CFA provides more about credit scores that every consumer should know:

All your credit scores are not the same – Most people assume their credit score is a single three-digit number, but each of the three major credit bureaus (Experian, Equifax, and TransUnion) scores you differently, since they don’t necessarily have the exact same data in their files.

Closing old accounts will not necessarily boost your scores – Closing old or inactive accounts may inadvertently lower your credit score because now your credit history appears shorter. If you want to simplify, close newer credit accounts first or put the cards away so you don’t use them but your credit history stays intact.

Paying off a bad debt will not erase it from your score – Once a debt goes to collection, or you’ve established a history of late payments, you will deal with the consequences even if you pay off what you owe. It will show as paid, but it is not erased. Also,while your score will get a boost if you pay off an old debt, it may not be by as much as you think. The best way to increase your scores and keep them high is to make payments on time every month over the long haul.

Co-signing for a loan impacts your scores – When you co-sign for someone else’s loan, you are responsible for the debt – and if the person your co-signed for does not pay, your credit score will be impacted.