Auto insurance will soon be in your future, if you are not paying your insurance now.
New graduates need to establish their credit to obtain good interest rates on car financing, auto loans, and new home loans. If you do not have student debt, or haven’t used a credit card during your college career, it is important to start right away establishing credit. Apply for a card and buy some things- making sure you pay on time and don’t rack up a high purchase-to-limit ratio.
There are three companies that track your credit score: Transunion, Experian, and Equifax. Each company will usually have a different score for you, but they should generally be around the same. You are allowed one free credit report per year, and to obtain this report contact the Annual Report Requesting Service at:
P.O. Box 105281Atlanta, CA 30348-52811 877 FACT ACT (1 877 322 8228)
Or http://www.annualcreditreport.com/
Factors impacting your credit score:
Source: insurancescore.com
Payment History
Account payment information credit cards, retail accounts, installment loans, finance company accounts, mortgage, etc.
Presence of adverse public records (bankruptcies, judgements, suits, liens, wage attachments, etc.), collection items, and/or delinquencies.
Severity of delinquency
Amount past due on delinquent accounts or collection items
Time since past due items, adverse public records or collection items
Number of past due items on file
Amounts Owed
Total amount owed on all accounts
Amount owed on different kinds of accounts (for example, amount owed on credit card accounts versus mortgages)
Number of accounts with balances
Proportion of credit lines used (proportion of balances to total credit limits on certain types of revolving accounts- purchase to limit ratio)
Proportion of installment loan amounts still owing
Length of Credit History
Age of oldest accounts and the average age of accounts
Length of credit history
Time since accounts opened
New Credit
Number of recently opened accounts, and proportion of accounts that are recently opened, by type of account
Number of recent “voluntary” credit inquiries
Time since any “voluntary” credit inquiries- credit cards, etc
Types of Credit Used
Number of (presence, prevalence, and recent information on) various types of accounts (credit cards, retail accounts, installment loans, mortgage, consumer finance accounts, etc.)
Improving your score:
- Pay your bills on time, every time
- If you have a short credit history, don’t open a ton of new accounts too quickly. This will lower your average account age.
- Do rate shopping over a short period of time- the credit reporting agencies will view that as rate shopping, rather than looking for lots of avenues for new credit.
- Keep a low balance on credit cards
- Have credit cards but manage them responsibly
- Apply for new credit only as you need them
- Don’t closed a large number of unused cards as a way to raise your score- a lower overall credit limit can make your purchase to limit ratio lower and adversely affect your score.
1 comments:
I will start it with an example as in you may be out of school, but that doesn’t mean you’re free from report cards. In fact, if you want to buy a house, or any other big-ticket item, a lender will look up your “grade” as soon as you come knocking. That grade is your credit score.
There are many varieties of credit scores available to lenders. But the most widely used for large loans are credit scores, which are based on a scoring system developed by Fair, Isaac & Co. Following are five things you can do to boost your creditworthiness, plus more information on obtaining your personal score.
1.) Review your reports from all three credit bureaus for accuracy once a year as well as several months before applying for a loan.
2.) Paying your bills on time is always a good practice, and it’s especially critical that you make prompt payments close to the time you need a loan.
3.) A heavily weighted factor in your FICO score is how much money you owe on your credit cards relative to your total credit limit. Generally, it’s good to keep your balances at or below 25 percent of your credit card limit
4.) Pay off debt rather than moving it around i.e. since the ratio of your credit card balance to your credit limit is key, closing out an account and transferring the balance simply means you increase that ratio, which is likely to lower your score.
5.) Don’t close unused credit card accounts near loan time.
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