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Personal Finance

Understanding Credit

Improving your Credit Score

In addition to the three national credit bureaus, there are credit-scoring companies. The FICO score, created by Fair Isaac, is the most widely tested and used by creditors. You can purchase your score or learn more with scoring simulators at myFICO.com. Scores can range from 300 to 850. The higher the score, the better the credit rating. Generally, any score above 700 indicates a good credit risk and below 650 is a problem. Remember, you can work to improve your score, no matter how low it is right now.

Reasons Your Score May Be Lowered

  • Derogatory public record (court record) or collections
  • Delinquent payment on accounts
  • Number of accounts with delinquency
  • Credit limits are maxed-out
  • Too many new accounts or accounts are too new to rate
  • Too many accounts from sub-prime lenders (like finance companies)
  • Too many inquiries in the last twelve months
  • Length of positive credit history is too short, or no recent balances

Things You Can Do to Build Good Credit to Boost Your Score

  • Pay your bills consistently and on time
  • Check your credit report and write the bureaus to remove any errors
  • Pay down your debt load by paying more than minimums and not maxing-out limit
  • Avoid lots of inquiries. If you are turned down for credit, fix the problem before applying again

Credit Bureau and Credit Freezes

Credit experts recommend that consumers freeze their credit to reduce their risk of becoming an identity theft victim. This has to be done individually through a credit reporting agency, such as Equifax, Experian, TransUnion, or Innovis. That means making 4 separate freeze requests per person or 8 requests for a couple.

By freezing your credit, you prevent potential creditors from accessing your credit file, thereby preventing identity thieves from opening accounts in your name. However, credit freezes will not deter non-credit related frauds such as tax refund identity theft and health insurance fraud. For that, consumers are simply told to “be vigilant.”

Credit freeze requests can be made online, by phone, or by certified U.S. mail. Expect to devote some time to this task.

Note: The costs of security freezes vary from state to state. Fees may or may not be charged to add a credit freeze, temporarily lift (thaw) a credit freeze (e.g., when you need to apply for a loan), and remove a credit freeze. Different fees for credit freezes may also apply depending on whether someone is or is not a victim of identity theft.

 Credit Reporting Agencies to Request a Credit Freeze