Credit histories, getting credit and how lenders make decisions can be confusing. From the inside, it's a complex process. From the outside it can be so mystifying as to appear random. The first step in deciphering this process is understanding your credit history. Understanding that begins with your national risk score.
Getting the Score
You can request a free copy of your credit history from each of the three credit bureaus once per year. Do so by contacting Experian, Equifax and TransUnion individually with a request for your credit report.
You can also access this report through a wide number of credit watch websites. Generally, these sites offer a credit watch service and offer a free credit report in conjunction with a free or inexpensive trial of their service.
Finally, you can ask your next potential lender what your score is. Theoretically, they're not supposed to tell you but in practice most will.
Your Score
Your score will be a number from 300 to 850. Higher scores are better. Although credit score is not the only thing potential lenders look at, your score will land you in one of four general categories.
Excellent: scores of 750 and higher mean you'll get approved most of the time, and at premium interest rates.
Good: scores from 650 to 750 will usually get you approved for loans at standard rates of interest, though other credit factors such as debt-to-income ratio may result in a worse rate.
Fair: scores from 500 to 650 mean you have some problems with your credit. Potential lenders may add additional fees or exorbitant interest rates to help protect them from the lending risk you represent.
Poor: scores below 500 mean you'll have some real trouble finding credit. You may be required to resolve outstanding debts with other companies, offer collateral, pay very high interest or a combination of all three.
What Affects Your Score
The most important factor in your credit score is your payment history. It's also the easiest one for you to do something about. To increase your credit score, take out one or more reasonably sized loans or credit lines and make regular, on-time payments. If possible, automate these payments so it's impossible for you to miss one or be late.
Your type of debt and amount of debt are the next most important factors. Debt like mortgages and car payments look better than unsecured consumer debt on credit cards.
The length of your credit history and the age of your debts also affects your credit score. However, these don't have a strong affect (typically 5 to 10 percent combined) and are impossible for you to act on.
Tags: your credit, credit score, credit history, your credit history, your credit score
