We will never tire of talking about the importance of establishing and maintaining good credit. In the FICO score range (300 to 850), the average national score is around 690. The higher your score, the better concessions and financial offers you will receive. For example, you will get better interest rates on mortgage loans, car loans, and credit cards. You also get lower auto insurance premiums, housing rents, and it opens doors for you to find specific jobs.
To benefit from this, you must know the factors that influence your score and learn to read your report so you can detect and correct errors in your file.
Five factors influence your FICO credit score directly:
- 35% Payment history: the timeliness of your payments and if you have ever failed.
- 30% The amount owed: how much you owe on each line of credit concerning the total of your available credit.
- 15% The antiquity of the credit history: from when you have and maintain your history.
- 10% New credits and applications: how many times have you applied for new credit in the last two years?
- 10% The mix types of credits: the diversity of credits, fixed fees (car payment), or rotating (credit cards).
Although no one knows precisely the formula used to obtain your score, at least we know the percentage in which these factors influence your credit. Therefore, you can implement strategies to increase your score.
Understanding your credit report is a bit more complex, and it may be a little harder for you if you do not know English. But do not worry, here we are to help you and offer you a guide to interpret it.
How to read your report
The three leading credit agencies and issuers of your report are Experian, Equifax, and TransUnion, which should offer you the same information in a different format. If you find discrepancies once you get your reports, you must make a dispute so that you can fix the error and if it is something that your score is affected, eliminate it.
The credit reports contain the following information:
- Personal information: your name (and its spelling variations), current and previous addresses, work, and others.
- Public records: your public and legal information on foreclosures, liens, and bankruptcies.
- Collection or collection agency activity: if you have some collection account.
- Credit history: the types of accounts you have, the amount due and credit available, the history of the activity in each account, and in what state it is an account
- Credit requests: compilation of your high-impact requests (made by a creditor to give you credit) in the last 24 months and those of low impact that you request (which do not affect your score).
Fix errors in your credit report
If you discover some incorrect information on your credit report, you are responsible for fixing it. You must submit a dispute directly with the credit bureau that issued the report with the error. Remember that sometimes you will write your name with different spellings. Still, it is not recommended that you correct this error since doing so can eliminate part of the positive history connected to that name.
Once you inform the credit bureau, it must contact your creditor to determine if an error has been made. The Fair Credit law guarantees that the creditor and the credit bureau must solve your request within 30 days. If they have not done so, they should delete the information in question. This law has led many companies to “fix” the credit and “guarantee you remove all negative information in 30 days.” These companies do not tell you that if the credit bureau and the creditor verify that the damaging information is correct, it is included in your credit report again, even if the 30 days have already passed. That is, it is temporarily removed, and only the creditor has the power to change the information reported in your credit report.
Remember that the information of your accounts stays in your credit report for seven years and bankruptcies up to ten years.
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