Your credit score is important because it affects your finances as well as your career opportunities. Your credit score can even affect your personal life because some people take debt into consideration when forming relationships. It’s important to understand your credit score so you can nurture it and keep working on improving it. Here are six things to know about your credit score.
#1 You Don’t Have Just One Credit Score
Most people think of their “credit score” as one single thing. It’s not. You can have literally hundreds of different versions of your credit score. When you apply for new credit, the creditor will run an inquiry from one of the three credit bureaus.
Creditors can subscribe to a hundred different scores. The particular score is calculated from your credit report. There are different scores for mortgages versus auto loans and then others for other types of credit. Plus, your credit score can change week to week and month to month.
#2 Many People Don’t Check Their Credit Report
According to WalletHub, roughly 37% of consumers have gone longer than a year without checking their credit report – and more than 15% have never checked their credit report. That’s a problem. Without information, you won’t know if there is a problem with your credit score.
Regularly checking your credit score can be tough to remember. Instead, consider signing up for a low-cost credit monitoring service. Depending on the service you choose, you’ll be notified when your score changes and when there are positive or negative entries on your report.
#3 Many Credit Scores Have Errors
The FTC says about 20% of credit reports have errors on them. That means one in five people have an inaccurate credit report. It’s not likely that an error will be in your favor. Errors can run the gamut from benign to extremely bad for your credit score.
Some impactful errors include negative items like inaccurate debt collections or late payments that were really paid on time. The most problematic errors are identity theft when accounts are opened in your name. These can wreck your credit score and be troublesome to clear up.
#4 You Can Have No Credit Score at All
Did you know it’s possible to have so little credit activity or credit history that you have no credit score at all? About 10% of Americans don’t have a credit score or have one that’s too low to register, but most of these people are younger and just starting out.
The Motley Fool says roughly 80% of 18 and 19-year-olds have no credit score, but there are 45 million Americans with no credit score and not all of these are accounted for by those in their late teens. When you’re starting to rebuild your credit after bankruptcy, at least you’re not this bad off.
#5 Very Few People Have Perfect Credit
Another thing to know is that few people have “perfect” credit. The threshold for “excellent” credit is 720 and above. As of now, the average American credit score is 695 which is considered fair. No matter what your credit score is, you can always improve on it.
Credit scores range widely and you should never assume yours is worse than anyone else. Even people you think are doing well might be in over their head in debt and with a credit score that is much worse than yours. You just never know what’s going on with people in private.
#6 Your Score and Report Are Two Different Things
Many people get their credit score and credit report confused. They are two different things. A credit score is calculated from information on your credit report. There is nothing you can do directly to alter your credit score. It is simply math from a formula that can vary by each creditor.
Your credit report is something you can take steps to improve. If it’s errors, you can request corrections. If you don’t have enough credit, you can build it. If you have negative items on your credit report, you can work to diminish the impact by improving other aspects.
If you are struggling to rebuild your credit after bankruptcy, contact Credit Score Keys today for a free consultation. We strive to help you make the most of your financial fresh start. Call us today at 919-495-2365.