Give your credit score the credit it deserves

When you apply for your first job out of college or when you want to rent your first apartment in SoHo, your credit score will be there. In sickness and in health, in good times and in bad, it will follow you wherever you go. This can be a good thing or a bad thing. Knowing a few key points about how your actions today have consequences down the road can help you maintain a healthy relationship with your credit score.

In the most general terms, your credit score is a number that tells possible lenders how likely you are to repay a loan. The most common type of credit score is called the FICO credit score, which ranges from a low 300 to a high 850.

FICO is based on five components: payment history, amounts owed, length of credit, type of credit, and new credit.

1. Payment history is exactly what it sounds like: it tells possible lenders when you’ve missed or been late paying in the past or, conversely, shows how you have never missed a payment.

2. Amounts owed describes the balances on all types of accounts that still need to be paid. It includes how much of a loan is paid versus what still needs to be paid.

3. Length of credit shows how long you have had accounts and demonstrates your ability to maintain good credit habits over an extended period of time.

4. Type of credit includes what kinds of accounts you have and how many of each type you have.

5. New credit details when the last time you opened an account was and with what frequency you make requests for credit.

Some quick things to keep in mind regarding your credit score and credit report:

-Your credit report is a record of all of your credit history and explains why your credit score is as high or low as it is.

-There are three different credit reporting agencies (Experian, Equifax, and TransUnion) that sell your credit report to possible lenders that will then determine your eligibility based on that information.

-You can request one free credit report from each credit reporting agency each year from in order to make sure your credit is healthy.

-If there is damaging information on your credit report, it will usually appear on your credit report for seven years.

-Lenders will not remove the damaging information if the credit reporting is accurate, since it portrays your accurate credit history.


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