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True and False Factors of a Credit Score

 

What’s True and What’s False About a Credit Score?

First, let’s define what a credit score isA credit score is a number that depicts your creditworthiness. It tells a lender how you behave with credit and how likely they will repay their bills if they give a person a loan or a credit card. The credit score number can be between 300 and 850, and the higher the Score, the better a borrower looks to potential lenders.

When it comes to your credit score, the number of open accounts, total debt level, and repayment history are important factors. Your FICO®, also known as credit score, ranges from 300 to 850. If you haven’t yet built a credit history, there’s no information on which to base that calculation, so there’s no score at all. Once you begin to establish a credit history, you might assume that your credit score will start at 300 (the lowest possible FICO® Score).

True or False?

Other unpaid bills – even the ones that don’t go to collections – can affect your credit.

Answer: True

One late payment can hurt your Score and remain seven years from the missed payment date. Follow up on old accounts to make sure they’re closed – and don’t end up in collections because of a small amount of debt left on them. Remember, the key is to pay more than the minimum amount due. If you only pay minimums, you’ll build up a lot of interest, which will make your debt even harder to pay off in the long run.

True or False?

Experian, TransUnion, and Equifax are companies that monitor and fix your credit score, so you don’t need to worry about doing anything.

Answer: False

There are three big nationwide providers of consumer reports: Equifax, TransUnion, and Experian. These reports contain information about your payment history, how much credit you have and use, and other inquiries and information. It is always going to be beneficial to monitor your credit scores regularly. Reviewing your credit reports will not negatively impact your credit score as long as you’re accessing it from the right places. The same goes if you to check your credit reports through Annual Credit Reports.

True or False?

It’s best to close down your credit card since it’s too tempting and a risk to have any credit card on hand.

Answer: False

To build a credit history, individuals must first obtain credit. A few entryways to begin to build credit are obtaining a low limit or secured credit card, getting a small loan at a store, getting a gas credit card, or asking someone to co-sign on a small loan or credit card. In fact, according to the Consumer Financial Protection Bureau, “it is quite possible that closing an existing credit card could hurt your Score rather than help it. Part of your Score is based on the amount of credit you have and the amount you’ve used – this is known as the credit utilization ratio. So closing an existing card can increase your credit utilization ratio and lower your Score.”

Covid-19 Impact – Reviewing your Credit

Credit histories and the reports those histories produce are essential factors in our financial lives. Consequently, be sure to manage and protect your credit during the COVID-19 (coronavirus) pandemic, and remember that you can receive free weekly online credit reports until April 2021. Furthermore, in addition to your free annual credit reports, all U.S. consumers are entitled to six free credit reports every 12 months from Equifax through December 2026. You can access these free reports online at AnnualCreditReport.com or get a “myEquifax” account at equifax.com/personal/credit-report-services/free-credit-reports/ or call Equifax at 866-349-5191. Check out more information at Pandemic and Your Credit.

UF/IFAS Extension Orange county – Homebuyer Workshops 

In closing, UF/IFAS Extension Orange County is a HUD-Approved Housing Counseling Agency. If you are interested in learning more about your credit score, register for one of our workshops by clicking on First Time Homebuyer workshops.