Credit scores play a critical role in determining your eligibility for auto loans, credit cards and mortgages. They’re also important for monitoring your credit score and avoiding debt-related penalties.
How Your Credit Scores Are Calculated
The three major national consumer reporting agencies, Equifax, TransUnion, and Experian offer credit scores based upon your credit reports. Each CRA has its own set of rules and regulations that could cause differences in credit scores. This is especially true when multiple loans or cards were requested in a short amount of time.
A iSoftpull scoring system employs complex calculations to calculate your score. For instance, if you have a payment history is late for 30 days or more your credit score is likely to go down. However, if you pay your bills on time every month, your score will probably be higher.
Your credit mix (or the kinds of accounts you have) can also affect your score. Some scoring systems consider the number of installment and revolving credit accounts you have, as well as your recent credit activity.
It’s best not to have too many credit card balances and to open new credit lines unless absolutely required. Too much new debt can hurt your credit score because it can signal to lenders that you’re taking on too many debts.
You can track your credit score by checking it periodically either by yourself or using an online service such as Experian’s Credit Watch. This service is free and will send you an account of your credit report, as well as alerts when your score changes.
When you are prescreening credit pulls and the Credit Score Disclosure
The Fair Credit Reporting Act requires any creditor or financial institution that receives credit report information to provide you with an explanation of your credit score. The disclosure must include an explanation of your rights under Fair Credit Reporting Act as and an explanation of how credit scores are calculated. It should also include a graph showing how your score compares to others in the United States.
The range for credit scores is usually 350-850. There are some models that fall outside the range, like VantageScore and FICO(r).
How do you get a credit score
Register for a personal finance website such as NerdWallet or an app for personal banking that provides credit scores to get an instant credit score. It is best to review your credit score frequently and use the same score each time you check it. This will help you to identify any changes that could negatively impact your credit score.
It’s recommended to ensure that the score you check is the same one every time since different websites, apps and monitoring services can have different impacts on your score. If you notice a large difference between the scores you’re using, it might be a sign of fraud or inconsistent results.
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