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Credit Scores

A credit score is a number lenders use to help them decide: "If I give this person a loan or credit card, how likely is it I will get paid back on time?"

Credit scores are also called risk scores because they help lenders predict the risk that you will not be able to repay the debt as agreed.

Scores are generated by statistical models using elements from your credit report, and sometimes from other sources, such as your credit application. However, scores are not stored as part of your credit history. Rather, scores are generated at the time a lender requests your credit report and then included with the report.

Credit scores are fluid numbers that change as the elements in your credit report change. For example, payment updates or a new account could cause scores to fluctuate. Scores may be different from lender to lender (or from car loan to mortgage loan) depending on the type of credit scoring model that was used.

 

What's in a credit score?

The information that impacts a credit score varies depending on the score being used. Credit scores are only affected by elements in your credit report, such as:

 

Credit scores do not consider your:

U.S. law prohibits credit scoring from considering these facts, as well as any receipt of public assistance, or the exercise of any consumer right under the Consumer Credit Protection Act.

 

Why lenders use Credit Scores

Credit scores came into wide use in the 1980s. Long before credit scores, human judgment was the sole factor in deciding who received credit. Lenders used their past experience at observing consumer credit behavior as the basis for judging new consumers. Not only was this a slow process, but it was also unreliable because of human error.

Credit scores help lenders assess risk more fairly because they are consistent and objective. Consumers also benefit from this method. No matter who you are as a person, your credit score only reflects your likelihood to repay debt responsibly, based on your past credit history and current credit status.

 

Credit Score Factors

Score factors are the elements from your credit report that drive credit scores and indicate what elements of your credit history most affected the credit score at the time it was calculated. For example, your total debt, types of accounts, number of late payments and age of accounts affect credit scores.

Score factors are the key to improving risk scores. They tell you what you must address in your credit history to become more creditworthy over time.

Lenders must provide consumers with the most significant score factors when they are declined credit.

 

Check your Credit

Whenever you apply for a new credit card, loan or extension of credit, the potential lender will most likely review your credit report before making a decision. You should too! Check it several weeks or even months prior to making a large credit purchase.

 

How to correct errors on your report

Federal law allows consumers to challenge inaccuracies and correct their credit files, and you are encouraged to dispute incorrect data. There is no fee. If you believe there is an error on your report, dispute it online for fast resolution. We will verify your dispute with the source of the data and receive a response within 30 days.

 

Free Credit Report

Request a free credit report to review your credit accounts and identify any inaccuracies. The federal Fair and Accurate Credit Transactions Act (FACT Act) requires each of the three consumer reporting companies to provide a free copy of your credit report, at your request, once every 12 months.

 

To Order Your Free Report:

Visit www.AnnualCreditReport.com or call 877-322-8228

 

Tips for Using Credit

When you are extended a line of credit, use it, but use it carefully. Be certain your account is reported to a credit reporting agency. Most importantly, make your payments on time.

Set up a budget and stick to it. You need to be aware of how much debt you already have and how much you are adding to that debt by buying with credit.

Once you have signed a credit agreement, you are responsible for it unless the creditor agrees to release you from the agreement. That not only includes credit cards or installment loans, but also health club agreements and cellular telephone contracts, even if you stop using the service. Remember also that a divorce decree does not release you from responsibility for joint accounts.

Protect yourself from credit fraud. Treat your credit cards like cash. Sign them as soon as you get them. Don't leave them lying around. Shred receipts that have your account number on them and do the same with credit offers you receive in the mail but choose not to accept.

Look over your credit report once a year. Reviewing your report will ensure that your accounts are being reported correctly.

 

Supercharge your Credit

Scores reflect credit payment patterns over time with more emphasis on recent information. In general, a score may improve, if you:

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