According to a recent Consumers Report Investigation, 5,858 volunteers were asked to get a copy of their credit report and check for errors between February 1, and April 1, 2022. Twenty-three percent found “Personal Information” errors and 11% found “Account” information errors.
Although mistakes concerning “Personal Information” may not hurt your credit score, it could make it more difficult or worse impossible to access your credit report. Whereas mistakes concerning your “Account” information can damage your credit score!
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FICO Credit Score
Credit Scores Do Matter!
That three-digit number has a direct impact on your ability to get loans and what interest rate you will pay!
WHAT IS A FICO SCORE?
The FICO® Score model is based on data in an individual’s credit report, housed by the three primary U.S. consumer reporting agencies (CRAs) including: TransUnion, Experian and Equifax.
The average credit score in the U.S. is at an all-time high of 711. This coincides with what the Consumer Financial Protection Bureau defines as “prime.”
About 1 in 5 American adults either have no credit history (“credit invisible”) or are unscorable. As a result, these individuals will have difficulty obtaining new lines of credit.
In the eyes of lenders, credit scores fall into several buckets, which indicate how risky it may be to extend credit to an individual. Outside of playing a role in approvals for a loan or credit, these scores can also impact an individual’s lending terms. Perhaps the most important terms among those are interest rates.
The higher an individual’s credit score, the lower their quoted APR will typically be.
FICO credit scores break down in the following manner:
- 800 to 850: Exceptional
- 740 to 799: Very good
- 670 to 739: Good
- 580 to 669: Fair
- 300 to 579: Very poor
It is important to check your credit by regularly looking at your credit report. Taking steps to improve your FICO® Score can help secure the best terms and interest rates available. Here are some actions that can help improve your score over time:
- Make sure you Pay all of your bills on time. Unblemished and timely payment records are valued by lenders.
- Keep your credit utilization at a good level. Preferably use less than 10% of your available credit each month and no more than 30%. Paying off your bills every month while fully using your credit is less effective. Raising your credit limit could help keep your percentage of utilization down. Closing an older credit card won’t help your score and it might actually hurt you.
- Limit your applications for new credit to only when you really need it. Every time you open a new credit card – or take out a loan or qualify for a mortgage – the overall average age of your credit takes a hit, and the hard inquiry subtracts more points from your credit score.
- Shopping around for credit/loans (getting multiple credit scores) can hurt your credit, but when credit scoring companies see different lenders pulling your credit score around the same time, they bundle multiple requests as a single query. So, shop for different rates at the same time, within 14 days or less.
Note: Seeking information about your own credit score is a “soft” inquiry and won’t cost points on your score like a “hard” inquiry from a bank does. - Late payments, collections, foreclosures and chapter 13 bankruptcies hurt your credit score for 7 years. A chapter 7 bankruptcy will hurt it for 10 years. But, with the exception of the bankruptcies, the impact of the other problems diminishes as the information ages.
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