It is well-known that people who have very poor credit score have to take a loan at an extremely high rate of interest. In some cases, companies that employ individuals ask for the credit report of the prospective employee for determining the financial liability of that person.
The process to be employed for checking the Credit Score
Individuals can get a copy of theirrespective credit reports on a yearly basis without any charge or fee, but in most cases, the bureaus that provide those credit reports donot give the credit score of an individual. The credit score is also known by another abbreviated term which is called FICO. This score involves three digits which are indicative of the strength of the credit taking ability of a person and reflects the overall history in terms of credit acquisition. Thereforeknowing this number is vital for the individual and there are a few ways in which this information can be collected, these methods are discussed below:
- Credit card agencies that provide the clients with credit cards also include monitoring services for free. The customers of that credit card company can check the credit score by using the monitoring tool provided by the company.
- The bureaus that provide individualswith the credit report can also allow a person to acquire the credit score. However, a small fee has to be paid for that purpose by the person who wants to know his/her score.
- There are also service providers that arepresent for monitoring credit and the person who doesn’t know his/her credit score can availtheir services for checking the credit score.
The salient features about FICO
It is already stated that FICOis the credit score and for any person who is serious about improving his/her score needs to know how the score is calculated and the important factors that constitute this score. Without having succinct knowledge in this regard, it will be impossible to move forward with a plan for raising the credit score. The important aspects of the credit score are discussed below:
- The calculation of the credit score:
A credit score is a number which is calculated by considering several aspects. The past payments of a person, the amount that is outstanding in one or more loan accounts, the span of time that has elapsed since the initiation of the credit acquisition procedure, new types of loans taken by a person and the number of credit sources which a person has are taken into account for formulating the credit score.
- The range of credit scores:
The organization that is responsible for formulating the credit report uses a particular range for arriving at the credit score of a person. The upper limit of credit score ranges from 840 to 925 as per credit report providing organizations. Usually, a score of 670 is taken as a good credit score.
- The multiple categories present for depicting the nature of the credit score:
When the score is calculated it is measured against five different categories. Each category has a range, and the first or exceptional credit score is taken to be 800 or above while the poor category of credit score begins from 579 and further down. The values that lie in between are separated by the fair, good and very good categories of credit score. The mentioned range or values are not universal and can slightly vary depending upon the credit institute that formulates the reports and scores.
Taking stock of the situation with regard to the credit score
How do I increase my credit score quickly is a constant source of anxiety for many individuals who are at the lower endof the scoreboard but quick succession is only possible after a person is completely aware of the position of his/her credit as per the given categories. Once the credit score is taken down, then the position can be understood fully. If the result is not inspiring theninstead of losing hope, it is important to boost one’s confidence and get to work so that the score improves. The actions which can be taken to promote the credit score are discussed below:
- The tracking of the score:
When the credit score is low, it is of paramount importance to track it on a routine basis. There are tracking services that allow a person to check the credit score often. An individual who has to work upon the credit score should use such services for keeping a keen eye on the credit score.
- Check for inconsistencies in the credit reports:
In many cases, it has been observed thatwrong information in the creditreport has caused a significant lowering of the credit score. A personshouldtherefore meticulously scan the credit report for any wrong information. If any mistake is found, then the company that has given the report should be notified about the mistake along with legal proof. The same mistake should be highlightedto the informant who has filed the report, and legal proof should be presented. The correction of the mistake should be ensured by following up the rectification procedure.
- Keeping credit accounts active but not overburdened:
Having several credit sources is a good option as it increases the credit score, but itis best not to hit the upper limit of a particular credit source. The credit should always be taken in a combined manner from several sources so that total available credit also stays quite high and credit taken alsogets easily resolved. Keeping open lines when it comesto credit sources is also useful even if the credit optionis rarely used because thatviablecredit adds to the total amount of credit present for a particular individual.
Hence it can be said that acquiring informationregarding one’s credit position will help in observing the problems in the credit score and then suitable repairing actions can be taken for managing the credit field properly thereby increasing the credit score in the process.
Isabella Rossellini is a marketing and communication expert. She also serves as content
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