What’s included in your credit score?

credit-scoreHaving a high credit rating is not just a matter of paying your bills on time. Financial institutions rely on industry-standard scores like the FICO score, which take into account many factors. The score is calculated using the credit information reported to the three major credit bureaus by your current and past creditors. The following shows approximately how different aspects of your credit report impact your FICO score:

  • Your payment history – how often you pay on time (35% of your score)
  • Your total debt – how much you owe and its relation to your available credit (30% of your score)
  • Your length of credit history – how well-established your credit is (15% of your score)
  • Any new credit – how many credit vehicles have you added recently and how many inquiries you’ve had (10% of your score)
  • Your credit mix – what kind of debt you have (credit cards, loans, lines of credit, etc.) (10% of your score)

In addition, some types of judgments, like tax liens and bankruptcies, may also factor into your FICO score, although the effect diminishes over time.

How do I find out what is in my credit report?

Legally, each of the three major credit bureaus must give you a free credit report once a year. You can get all three reports at the same time, or one at a time, throughout the year, which can help you keep a closer eye on your rating. You can obtain your free credit report at www.annualcreditreport.com.

If you are turned down credit, you are also entitled to a free credit report from the credit bureau that provided the credit report score. You should receive information from the institution that declined your application explaining the reason for the decline and providing you with the contact information for the credit reporting agency that supplied your credit report.

What if I find an inaccuracy?

You have a legal right to have an error-free credit report. To be sure you do, verify your credit report information at least once a year. If you notice an inaccuracy, follow these steps:

Step 1: File a dispute with the credit bureau. Include detailed information and documentation. You can mail your dispute or file it online. If the bureau agrees it made an error, it must legally correct your report.

Step 2: File a dispute with the creditor. If the creditor reported inaccurate information to a credit bureau, it must inform the credit bureau of the mistake and have it corrected on your behalf.

Step 3: Amend your credit report if necessary. If you can’t prove the inaccuracy to the satisfaction of the credit bureau, you still have recourse. Credit bureaus must allow you to amend your report with a personal explanation, which will be visible to any institution accessing your report in the future.

These protections are put in place to be sure you are represented accurately and fairly to anyone requesting your credit history. Please feel free to contact me if you have any questions.

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