Feeling Confused About Credit? 5 Fast Facts To Give You Clarity

This post is sponsored by Lexington Law Firm! Thank you! It’s companies like this that allows us to keep this website running.

 

The rules of credit can seem overwhelming, especially because most of us didn’t learn about them in school. If you are confused about credit, you are not alone. You are taking a great first step by educating yourself. Here are five fast, basic facts about credit that will help you find clarity.

 

1. Your Credit Report Is Different Than Your Credit Score

A credit report is a detailed outline of all of  the data that a credit bureau has about you. This data includes your spending history, like the number of credit cards you have, and how much you spend and pay on each per month.

Personal data like your employment history and whether or not you have ever been sued will also be on the report . There are three major credit bureaus in the US that produce credit reports: Equifax, Experian and TransUnion. By federal law, you are entitled to one free credit report per year. You can request it online.

Your credit score is based on the data that these bureaus collect. The score is a single number, and may be different depending on the formula used to create it. Two common scores are your FICO score, and your VantageScore. One major difference between the two is that you can have a VantageScore within a month or two, while a FICO score requires six months of credit activity.

 

2. Your Credit Score Affects Your Interest Rates

Why is your credit score important? It will affect the interest rates that you have access to when you want to borrow money. The difference between a high interest rate and a low interest rate on your major purchases can amount to thousands of dollars per year.

 

3. A Good FICO Score Is 670 to 739

The highest FICO score is 850, but that isn’t what your goal should be. According to Experian, one of the major US credit bureaus, 670 to 739 represents a good score. 740 to 799 is “very good”, better than the average consumer.

 

4. 8 Billion People in the US Are Victims of Identity Theft Each Year

Did you know that 8 billion people in the US fall victim to identity theft each year? Your credit report can help you identify fraudulent charges due to identity theft.

If you check your score often, you can spot unexpected dips in your numbers which might indicate identity theft. The issue can take hundreds of hours to clear up, so it is wise to work with a credit repair service that will help you fix the problem.

 

5. Mistakes Affect Your Credit Score

Simple mistakes can drag down your score. To catch the mistakes, you need to look at your credit report. An example of this might be a gym membership that should have been canceled, but the gym made an administration error and then reported your late payment to the credit bureaus.

Claims that are made against you can be argued, if you believe that the claim is an error or miscommunication. Seek support when you engage in credit disputes. Talk to a lawyer, a credit repair company, or both.

Credit can seem overwhelming and confusing. Understanding simple facts, like the difference between a credit report and a credit score, and how each are used, can help you get ahead. Know what you’re aiming for — a score of 670 or better — and some pitfalls to avoid. Monitor for identity theft and argue against mistaken claims so that your score can reflect your true spending habits.

This post is sponsored by Lexington Law Firm! Thank you! It’s companies like this that allows us to keep this website running.

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