The credit score
It is a three-digit number that lenders use to assess your creditworthiness and your ability to pay your bills on time.
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Common factors that could damage your credit score are negative items, such as bankruptcies, foreclosures, late payments, high credit utilization, and credit inquiries from potential lenders.
Some people employ the services of credit repair companies to dispute incorrect or fraudulent credit items on your behalf, but the outcome is not guaranteed.
Mortgage lenders usually use FICO scores to determine one's ability to pay them back. Since the three credit bureau scores are different, some banks look at all of them to get an average, or tri-merge, score.
Two common factors in determining your creditworthiness are timely payments and credit utilization. Other factors like credit history, types of accounts, and recent hard inquiries are used to varying degrees. It means that the score you see may be different to the score a lender use.
Bill Fair and Earl Isaac developed credit scores in the 1950s to create a standard system to measure credit. They called it Fair, Isaac, and Company, known as FICO. Another credit score is the Vantage Score.
Both FICO and Vantage Score base their scores on analysing each credit report as collected by the three major credit reporting agencies: Experian, Equifax, and TransUnion. But FICO and VantageScore use different methods for a credit score, taking various data into account.
A credit report documents your credit history, your current status of accounts and payments, and when companies have pulled your report when you've applied for credit. A credit report is the source of your credit score.
It is vital to keep an eye on your reports and notice anything that could cause long-term damage to your credit. You can request a free credit report per bureau every year.
Your credit score is calculated using a mix of data, including your payment history, how much credit you have and length of credit history.
Here's the golden rule: Only charge what you can afford to pay every month in full.
Keeping your balances low will help boost your credit score. Aim to keep your debt utilization — which is amount of available credit you actually use — as low as possible.
There's no need to have a wallet full of credit cards, but having one or two that you use responsibly will help your score.
While kids and teens get to learn about a lot of stuff, most families and schools do not teach them how to manage their money. In some families, it is considered a taboo subject and many friends are too busy showing off to help others manage their finances.
Even the basics of financial literacy are not taught at an early age, resulting in many of us falling into the trap of consumerism and debt.
When mortgage interest rates get low, refinancing isn't always the best choice.
Deciding when to refinance your home loan depends on several factors besides whether you can get a better mortgage rate.
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