Fuzzy Credit Scores - Do you know your numbers?

In order to build and maintain a healthy credit score, it pays to know exactly what it is. Scores can range anywhere from 300-850. The higher the score the better, and each bureau will fluctuate somewhat based on their own unique formulas.  Contrary to what you may hear, you do NOT have to pay for these reports.

If you have not taken the time to review your credit report lately, you can run a free search at http://www.annualcreditreport.com.  You have the choice of pulling reports from all 3 bureaus at once, or you can choose to do one at a time throughout the year (i.e. on a quarterly basis).  Each entity (Experian, Equifax, and Transunion) is required to give you one free report each year. 

Did you know it's estimated that 70% or more of reports indicate some type of error?  So, it's highly likely that you will have something that must be disputed within your lifetime. Be sure to stay on top of this and dispute any incorrect entries as well, because it can affect you and your overall score greatly.

Before you read on...take that all important step & check your credit!

The next most important step you can take to achieve a healthier credit score is to STAY CURRENT!  Whenever a payment is more than 30 days late, you run the risk of negatively impacting your score. Your credit history makes up about 35% of your overall score, so it's vital that you make every effort to pay your bills on time.

Also, recent delinquencies will have a greater impact on your history than one or two isolated occurrences which happened over two years ago.  Your best plan of action is to budget your finances in order to create a payment plan to set aside necessary finances to pay your bills each and every month.

As long as you are paying at least the minimum amount each and every month, you will build the discipline necessary to stay current.  Be sure to also establish a system of automatic reminders to avoid forgetfulness. 

In order to build up a credit score, you must have an account that is at least 6 months old and has had updates within the last 6 months, with no active disputes.  Any negative history can remain on your reports for up to 7 years. 

However, if you went through Chapter 7 or 13 bankruptcies, records could remain on your report for as long as 10 years.  Also keep in mind that by signing on as an authorized user with another who has strong credit can also boost your score.

Next, “hard” inquiries will only negatively affect your record for 1 year, even though they may show up on your report for 2 years.  While this is the maximum amount of time that negative marks can remain on your report, creditors can wipe records clean at any time throughout this timeframe using their own discretion.

Next post: 5 Steps to Using Your Credit Card Wisely.