Today: Feb 24 , 2020

Regaining Control Over Your Credit Score

03 January 2020  

It's a new year. Time to tackle your credit rating.

Your credit rating can dictate a number of vital decisions in your life. Unfortunately, there are millions of people who don’t know the first thing about personal credit scores, how they work, or what to do to improve a bad rating. Since this is a rating that will impact whether or not you qualify for loans and mortgages in the future, it can be important to take time to learn more about this system. The more you know, the easier it can be for you to make the right adjustments to the way you handle debt.

Give yourself a chance to look over some of these facts surrounding your credit. Use the information provided to regain control over your score and improve your financial future. 

How Are Scores Determined?

One of the biggest questions you might have is how your score is determined. While it can be a bit complicated, there are a few key areas that credit companies focus on when figuring out your rating. Your payment history plays a big part, specifically in regard to whether or not you are on time with your payments and how frequently you make them. Credit utilization is also taken into account. This number is determined by looking at all of your credit sources and weighing out how much of each of the balances you utilize in a given period. 

Variety can also play a role in your score. When you have several credit cards and loans you are paying back at once, it helps showcase your ability to handle several debts at the same time. The frequency at which you apply for credit cards may also negatively impact your score. The more applications you have completed, the more inquiries are placed on your account, and this can lower your score a bit. All of these factors play together to determine what your actual rating is and how it changes over time.

Credit Reports

While there are several credit scoring models to stay aware of, there are also a few distinctions to understand when it comes to your rating versus your report. The rating you receive is the actual score that lenders and other organizations will look at when determining your eligibility with various financing options in your future. The report, on the other hand, is the document that contains all of the pertinent details surrounding your credit history. In most cases, the report has a more in-depth look at how you’ve handled your debt.

The good thing to know is that not all lenders are going to look at the full credit report. What’s even more interesting is that you can easily access your own report for free. According to the law, you have the right to receive an annual report from each of the three major credit companies. Some individuals find this beneficial because it helps them monitor their reports and spot any inaccuracies that might have taken place over the course of the last year. Your score can often be obtained for free through several services.

Start Making Adjustments

Understanding the details of your credit report can be a great start, but you need to take real action in order to make improvements. After you get a feel for what your score is at the moment, you will start to see how much work is required of you. There are several ways to change your rating for the better. Most financial experts suggest paying down as much of your existing debt as possible. By tackling the total amount you owe, you will start to see a significant shift in your score.

It might also be beneficial for you to increase your monthly payments on each of your bills. While paying the minimum might seem like the easiest way to budget your payments, you are actually doing more harm than good with this strategy. Smaller payments mean you are usually only covering the interest payments. The more you are able to contribute, the less you are going to owe in the long run. Find a balance that works for your income and see what kind of changes you can make. 

Avoid Paying Too Much

One of the biggest reasons to think about tackling your credit rating and making improvements is because a poor score can cost you a lot of money over the course of your lifetime. When you have a low rating, you are offered terms and conditions on credit lines and loans that reflect your score. Since these rates are usually a lot higher than the standard, you will essentially be throwing your money away on gaining access to credit. Working on fixing the rating can help you get ahead and save a significant chunk of change.

Also, beware of credit card offers with annual fees. These fees can really bite - often as high as $75-125 per year, just to have a credit card. If you don't pay the annual fee at once, you'll end up paying interest on that, too.

Automated payments can be a huge advantage when it comes to managing your debt. Set your recurring monthly payments to be automatically debited from your account and it can ensure you will never fall behind. Establishing this system is simple, check with your creditors and utility companies to learn more about how you can put this into effect and reap the benefits for your own finances. 

Find the Right Path

It is hard to deny how wildly important it is for you to have a strong idea of what your credit rating is and how it is determined. When you give yourself time to research the details of how credit reports work and what you can do to make a change in your overall rating, it can help you pull yourself ahead and see a brighter financial future in no time.



Lynne LaMaster

Lynne LaMaster is the Founder and Editor of the eNewsAZ Network of websites. She asks a lot of questions! In her spare time, she loves photography, cooking and hanging out with her family.