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Common questions about credit scores

Todays Date: September 21, 2018

If you have applied for and been denied a loan recently, or, even if approved, your rate was too high, you have seen first hand the importance of having a good credit score. If you want to improve your credit score, the first step in credit repair is to understand the basics of your credit score. The credit score the three credit bureaus assign to you may seem like a puzzle. However, only in understanding its components can you work effectively to repair your credit.

What is the range of a credit score?
Many different pieces go into determining your final credit score. The three credit reporting agencies – TransUnion, Experian and Equifax – use the FICO scoring model. FICO scores range from 300 to 850, with 723 being the median score of most of the population.

What is the purpose of a credit score?
Credit scores are defined as a number that will predict the likelihood a person will have a past due account of 90 days or more within the 24 months after the score is calculated. The higher the credit score, the less likely the person is predicted to have a past due account.

What is a good credit score?
The definition of a ‘good’ score is variable; it varies by lender, and is even affected by the economy in general. However, broadly, a score to strive for is a FICO score above 750. Scores between 700 and 749 are good, but will not provide you with the lowest rates. Scores between 650 and 699 are on the fence, and anything below 650 is the 2011 dividing line between prime and subprime and will most likely result in a decline of all credit requests.

How is your credit score determined?
Your credit score is essentially the grade that the credit bureaus place on your predicted credit worthiness. In calculating your score, the following formula is followed:
• 35 percent of your score is based on your payment history
• 30 percent of your credit score is based on your outstanding debt
• 15 percent of your FICO score is based on the length of time you’ve had credit
• 10 percent is based on new credit
• 10 percent of your credit score is based on the types of credit you currently have
The magic number that results may differ among each of the credit bureaus. Your credit score is vitally important, as it is used to determine whether or not you will be approved for a loan and even the type of rate you receive. Plus, credit scores are even beginning to be used for job applications and insurance.

How can you improve your credit score?
You can work yourself to improve your credit score by disputing with your lenders or with the credit bureaus any questionable negative information that appears on your credit report. However, another option is to work with a credit repair company. Credit repair companies work directly with your creditors and with the credit bureaus to remove any questionable negative information from your credit reports, working on your behalf for your credit repair.

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