Establishing positive financial habits can transform your life and set you up for a successful future. Learning how to set up good credit and how to maintain it can help you meet all your financial goals. You need good credit to purchase a vehicle, obtain a credit card, and buy a house.

What exactly is my credit score, and what exactly is it?

Your credit report is based on four key data areas:

Personal Information: Name, address, Social Security number, employment details, and the date of birth.

Credit history: This will record the kind of account you have, the dates they were created and the amount of loan (or credit limit), your payment history, and the balance of your account.

Public Record: Court judgments, foreclosures, garnishments, bankruptcies, and legal actions.

Questions: A list of lenders who have inquired and have accessed your credit reports over the last two years.

What factors are used to create the credit score of my client?

A credit score gives an overview of your credit history. It enables a lender to examine your score and assess the level of risk you pose to your credit, which translates into your capacity to repay your credit. It is the FICO Fair Isaac’s Score is often utilized and is based on the following elements:

Credit history length: This investigates how long your credit accounts have been and how often they are used. Your FICO score will increase based on how long you’ve been on credit.

The amount you owe: This looks at the available credit lines and credit card debt. Your score is lower if you owe more than the credit limit.

Kinds of Credit Used:

It will also look at how many credit cards you have and the number of installment types of accounts under your account. If you can have a broad collection of credit accounts, then your rating will be enhanced.

New credit: It examines the accounts opened recently, like credit cards, and new credit requests, such as auto loans. Credit can be affected if you have several credit inquiries.

History of payments: Any bankruptcies or late payment items are deemed, and defaults can affect your credit score.

Watch Your Credit Score & Credit Report

Have you heard you could request a copy of your credit report once a year? This was made possible by federal law and is provided by the three primary consumer credit reporting bureaus: TransUnion, Experian, and Equifax.

Regularly checking your credit will help you know if something is amiss. Sometimes, the payments need to be made promptly, or they may get delayed in delivery. In other cases, it’s an indicator that identity fraud has occurred.

Visit the Federal Trade Commission Identity Theft Website

This national resource can aid you in protecting yourself and stopping identity theft. This site will help you understand how to prevent being a victim and what to do if your identity has been stolen.

How is my credit score broken down?

There are many definitions for your credit score, ranging from excellent to fair, fair, or poor. These provide an overview of your score. Loan decisions are based on many aspects that go beyond the credit score. There are many factors your lender considers, such as your employment status, debt ratio, and credit score.