Bad Credit Score
A bad credit score can haunt you for years to come.
If you don't have good credit, it may be difficult--or
nearly impossible--to obtain more credit in the future,
or qualify for a home or auto loan. But how is your
credit score calculated, anyway? And how can you improve
your credit score in the long run?
There are three major credit bureaus in the United
States--Equifax, Experian, and Trans Union. They use
the following to determine your credit score: you payment
history (35 percent), the amount you currently owe (30
percent), the length of your credit history (15 percent),
what types of credit you have used (10 percent), and
any new credit you have (another 10 percent). You are
scored from 300 to 850 points. The median is 725, and
720 is considered "good credit." Credit below
600 points is poor. Approximately 13 percent of population
of the United States has a score below 600.
How can you raise your credit score?
First, you need to check
your reports--either online or by contacting the
credit bureaus directly--to make sure all the information
on them is accurate. If you find inaccuracies, you can
have them removed. But the most important thing you
can do to improve your credit score is to pay your bills
on time. Get current, and stay current! Also, just because
you have credit, don't max it out--stay at about 50
percent of your limit. And don't start opening several
accounts just to establish new credit--this raises a
red flag for many lenders.
Steps to Improve a Bad Credit Score
It's never too late to improve a bad credit score. By
establishing smart habits today, you can save yourself
thousands of dollars in the future by qualifying for
lower interest rates. A bad credit score doesn't have
to ruin your life forever--there are nonprofit credit
counseling services that can help.
Read more about Bad
Credit Basics in the Banklady Credit Library