Credit Scores-More Important Then You Think

Do you know how you stand or score from a lenders point of view. When it comes to getting approved for a loan or credit card, you may have poor credit health. And lenders do take this into consideration on whether they want to grant you credit or extend you existing credit. Your credit score measures your overall credit history health and the higher your score, the better health your in from how a lender may see you.

There are a lot of people out there, who really have no idea what their credit score is today. If you have ever had a conversation with your friend about this, they sometimes answer-"Oh it's fine, or I just was recently extended credit on one or both of my credit cards", or something of that nature. The real truth is that a good deal of us, do not know our actual credit or FICO scores. And not knowing what those three digit numbers are, can have negative consequences when it comes to applying for an auto loan or even a mortgage.

Credit scores are reported to three different Consumer agencies. These agencies are Transunion, Equifax and Experian respectively. Each of the three bureaus will determine your credit score, by assigning, or giving it a three digit number.. The higher that three digit number or score, the better chances you will have of getting that loan, particularly at a lower interest rate. I am no Suzie Orman, when it comes to managing my finances and do not have a perfect credit score either, which is probably somewhere in the ballpark of 850 to 900. However I do know what it is and where I stand, when my creditors take a look at my credit report. Which by the way you can obtain once a year for free. You simply log in to the Federal Trade Commission's website, or can also google their site. Everyone is entitled to one free copy of their complete, annual credit report each year. This is something that the government give the people for free, believe it or not.

Your credit report will show every little aspect of what is on it. Anywhere from the status of your auto loan payments, or mortgage payments. Right down to any missed payments you may have made on your educational loan, or revolving credit cards. It is basically a blueprint of how you spend and manage money. And before any creditors extend or give you a loan, they look at these reports very closely. This again, helps them not only to establish your credit worthiness, but also your ability to pay them back within a certain time frame. Transunion, Equifax and Experian, will each have information about you...who you owe, how much, and negative accounts against you; or those that were closed. And even any judgements against you.

All three credit reports may look somewhat similar, but can vary greatly as well. What one credit report says, the other two remaining may be reporting something entirely different. So when you print your report out online, or send for it through the mail, make sure you scan it closely. There could be mistakes, or old debts that you have settled in the past and they still appear on these reports.If that is the case, than you have to dispute these debts, or else they will go on haunting you for the rest of your life.

The same usually applies to your Fico or credit scores that go along with these reports. Let's say that Transunion gives you a score of 750, which is good and Experian reports your score as 700, which is still okay. But if you get a very weak or poor score of 587 from Equifax, that score alone can literally throw a monkey wrench into your credit worthiness and lower your chances of getting that loan. You may still get that loan or extended credit you applied for at your bank or credit union, but it may be at a much higher interest rate. So as you can see here from this illustration, knowing how you score from a lenders respective is very important.

So what if your credit is not so good and you want to make changes. Well don't give up the ship yet, because it's never too late to reverse a negative looking credit report and improve your scores. You are not alone when it comes to so so or poor credit. Believe me there are more people out there with bad credit than you think. Changing some spending habits and limiting your use of credit cards is one way to start. Having one credit card that is linked to your checking account is a good way to start. Use this to pay for the things you need ...groceries, gas and so on.

You can have the piece of mind of spending using a credit card,without having to worry about the ridiculous 22 or 23% interest charges associated with it. Also pre-paid visa or mastercards are a great way to manage your spending. These cards usually limit the amount that you can put on them. And in this way can train you to spend just so much for that particular day or week. They can be reloaded rather quickly by going online. And the best thing about them is that they carry no large interest fees and can be purchased at your local grocery store.

So even though a debit card linked to your checking account or a prepaid visa card are good for training you to limit your spending. They are not a real solution to the problem, if your credit report is already marred. They can and will help you to rebuild credit and to prevent you from spending additional funds that you do not have. The best way to start to repair your already negative credit, is to first start to pay off some of the debt on the three or four credit cards that you may already have. Let's say that you have two credit cards that have a $500.00 credit limit and you are nearly maxed out on both of these, or you pay $200.00 monthly on one, but you continue to use it right after you make a payment. In actuality you never really get that $500.00 balance down to zero. It can be like a vicious cycle and all you are doing is spending, after paying off a little of this debt and winding back up at square one again.

Revolving accounts with two or three open credit cards at once, is an example of the aforementioned. If you do have a number of plastic accounts, which I like to call them. Than it is important that they are being paid on time, which is what you should be doing to establish credit in the first place. Also keeping the majority of these accounts at or near a zero balance is desirable. But too much revolving credit close to the maximum amount of what a credit company gives you can be frowned upon also by lenders. It's better just to pay off that $500.00 debt on that one credit card, or better yet try to pay off both of them if you can afford to do so during one month. And once you do so, try not to use that card or cards again for awhile. In a worse case scenario, you can try to apply for a separate credit card and do not use the credit limit that the lender gives you on that card.

This is one way to help balance out your credit and improve your score somewhat, if you cannot get the higher balances down between the two credit cards that you already have as explained in my prior illustration. Creditors or lenders like to see that you have more available credit available to you, rather than having high balances on credit cards, that you have to eventually pay back. In other words this looks good to most lenders, because in a way it shows your current and future potential buying power.

Also if you have any other negative remarks on your credit report, it will show and also affect all three credit scores. And just one negative account that was referred to a collection agency or a judgement on your account can severely damage your score and that include charge-offs on your account. Usually a closed account or judgement will be reported across the board to all three credit agencies. If you do have an account that went to collection or an outstanding judgement on your credit report, it can be dealt with properly. The worse thing you can do, is to leave it there, because as I mentioned it will come back to either bite you on the behind, or haunt you the rest of your life.

If you call a prior lender or creditor that you owe money to and are having difficulty paying them back. They will be more than willing to work out with you, some sort of payment plan can be arranged that fits into your present budget. This is better than avoiding the creditors all together and not calling them back or answering their correspondence. You will only be stirring up the bees nest, so to speak and legal action can be taken against you, which no one wants the hassle of dealing with.

Yes, Judgements, charge-offs, accounts referred to collection agencies and even high revolving credit, can and will drastically reduce your credit scores and chances of getting any type loan if not resolved in the long run. And even for some of the men or women in the audience that pay child support. A record of child support payments and amounts owed also shows up on your credit report. In addition missing child support payments can affect your report and overall score. So if you do have a few missed payments or owe back child support, do not neglect this and try to get caught up as soon as possible. One other important thing that I almost forgot to mention in this article. And it is probably the single most important one,is Bankruptcy. Having one past Bankruptcy on your credit report looks worse to creditor's than having possibly three court judgements on it.

It's very true that many individuals have to declare either chapter seven, eleven or even chapter thirteen bankruptcies for many reasons. Possibly because they had lost their jobs and cannot keep up with the mortgage payments; or faithfully make payments on existing credit cards or maybe an auto loan. It is no doubt an easy escape to get out of paying what you owe to creditor's. And you may even think that it may give you some breathing room for awhile. But in reality it can be a real hassle in the long run.

You are only prolonging the agony. In fact bankruptcy's stay on your credit report for ten years. When a lender see this, they see nothing but red, which means trouble for you in terms of securing credit at reasonable rates, if at all. If you had to declare bankruptcy in the past, there is nothing to guarantee to your lenders, that you may have to file again at some future point in time. So if you can find some other sensible way around having to declare major bankruptcy, try to do so by all means. It is much easier to try to pay a little something each month to creditors, rather than having to file bankruptcy. And it only takes one phone call and about ten to fifteen minutes of your time.

So take these credit saving tips to bed with you, if you will and review them day in and day out. However try not to lose any precious sleep over them. Consider this tips like scriptures that you read from the Bible as you may-reading them faithfully and taking the advice within to heart. If you utilize the information contained within this article, you will without a doubt, be well on your way to dramatically improving your credit. Going from a negative credit score, to one which you will be proud of and one which lenders will see you as being a low risk to them. In addition, it does not take a great deal of time to repair your credit and improve those not so good looking scores. If your score is 587 right now for example, it will take approximately nine months to about one year to raise it to 730 or 750. This is a decent score which will show lenders, that you have been more responsible in managing your credit over the past year or so. And in turn they will not consider you a high risk in the future, when granting you credit when you really need it. So start managing your credit now and get rid of some of that plastic. you have been using. Not only will your wallet thank you, but you will thank yourself as well.