New Hampshire Money Advice: Your Credit Score

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Advice offered by Marc Hébert, President of The Harbor Group Inc., a certified financial planner. If you have any financial questions or would like to suggest a future topic, send an email to [email protected] Credit is probably an integral part of your life. Whether it’s getting a mortgage, a car, or getting an education, credit is probably a key part of the picture. Easy access to good credit can be a necessary part of life today. When they think of credit, most people think of credit scores. Lenders use these numbers to determine a borrower’s creditworthiness. A good score implies a good borrower. It may be easier to get a loan at an attractive rate with a good score. A credit score is not just used by lenders. Homeowners and employers can also use your credit score to make certain assumptions about future payment performance and your financial situation. Credit scores are determined by credit reporting agencies. They are Experian, Equifax and TransUnion. These companies track your credit history. Your score incorporates information ranging from payment history, amount owed, length of your credit history and types of loans. Based on this, they usually use software developed by Fair Isaac Corporation (FICO) to develop a score. Thus, the most common credit score is the FICO. This is usually a three-digit number that can range from 300 to 850. Lenders themselves decide which score is right for them – usually above 700 is favorable. With that in mind, here are some factors that can negatively affect your credit score: The most obvious is late payment. The history of these will be negative, especially late payments in the last 12 to 24 months. If you have missed payments, the lender will assume that the past predicts the future and that you may be at high credit risk. The next negative point concerns credit inquiries. Too many of them in a short period of time will negatively affect your score. Every time you apply for credit from a lender, there is a record of it on your credit report. A lender may view this as an attempt to access too much credit or as if they have been denied credit too often. Sometimes there just isn’t enough history to give lenders a good picture of your track record. You may need to establish your credit history before a lender will grant you more credit. Before you apply for credit, make sure your credit report is free of errors. If there are any negatives and they’re not yours, be sure to get them corrected before applying for credit. Don’t wait until you need credit to monitor your credit report. You can get your credit report from every credit reporting agency. Take turns – from one agency in the spring, the next in the summer, and the last in the fall. This will help you monitor your credit throughout the year. If you find an error, be sure to contact the agency and let them know that you dispute the information on the report. The agency will investigate the dispute within 30 days of receiving the notice and notify you of the outcome. If an error is not corrected, you can add a statement to your credit report indicating it as such. It might not help you with lenders, but at least they know your side of the story. In the event of identity theft, you can file a complaint with the Federal Trade Commission (FTC). You can also place a fraud alert or a credit freeze on your account. The FTC’s website, ftc.gov, has more information on identity theft. If you believe your credit report error is the result of identity theft, you need to take action. Building your credit takes time and a consistent review of the data. Ultimately, it’s worth taking the time to make sure you can borrow and access credit if you really need it.

Advice offered by Marc Hébert, president of The Harbor Group Inc., a certified financial planner. If you have any financial questions or would like to suggest a future topic, send an email to [email protected]

Credit is probably an integral part of your life. Whether it’s getting a mortgage, a car, or getting an education, credit is probably a key part of the picture. Easy access to good credit can be a necessary part of life today.

When they think of credit, most people think of credit scores. Lenders use these numbers to determine a borrower’s creditworthiness. A good score implies a good borrower. It may be easier to get a loan at an attractive rate with a good score. A credit score is not just used by lenders. Homeowners and employers can also use your credit score to make certain assumptions about future payment performance and your financial situation.

Credit scores are determined by credit reporting agencies. They are Experian, Equifax and TransUnion. These companies track your credit history. Your score incorporates information ranging from payment history, amount owed, length of your credit history and types of loans. Based on this, they usually use software developed by Fair Isaac Corporation (FICO) to develop a score.

Thus, the most common credit score is the FICO. This is usually a three-digit number that can range from 300 to 850. Lenders themselves decide which score is right for them – usually above 700 is favorable.

With that in mind, here are some factors that can negatively affect your credit score:

The most obvious is that of late payments. The history of these will be negative, especially late payments in the last 12 to 24 months. If you have missed payments, the lender will assume that the past predicts the future and that you may be at high credit risk.

The next negative point concerns credit inquiries. Too many of them in a short period of time will negatively affect your score. Every time you apply for credit from a lender, there is a record of it on your credit report. A lender may view this as an attempt to access too much credit or as if they have been denied credit too often.

Sometimes there just isn’t enough history to give lenders a good picture of your track record. You may need to establish your credit history before a lender will grant you more credit.

Before you apply for credit, make sure your credit report is free of errors. If there are any negatives and they’re not yours, be sure to get them corrected before applying for credit.

Don’t wait until you need credit to monitor your credit report. You can get your credit report from each credit reporting agency. Take turns – from one agency in the spring, the next in the summer, and the last in the fall. This will help you monitor your credit throughout the year.

If you find an error, be sure to contact the agency and let them know that you dispute the information on the report. The agency will investigate the dispute within 30 days of receiving the notice and notify you of the outcome.

If an error is not corrected, you can add a statement to your credit report indicating it as such. It might not help you with lenders, but at least they know your side of the story.

In the event of identity theft, you can file a complaint with the Federal Trade Commission (FTC). You can also place a fraud alert or a credit freeze on your account. The FTC’s website, ftc.gov, has more information on identity theft.

If you believe your credit report error is the result of identity theft, you need to take action.

Building your credit takes time and a consistent review of the data. Ultimately, it’s worth taking the time to make sure you can borrow and access credit if you really need it.

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