Know your Credit Score, Improving It Can Save You Money.  

Know your Credit Score, Improving It Can Save You Money

Paying attention to your credit score and trying to improve it can save you thousands of dollars in interest a year between your mortgage, car loan and credit cards. Your score determines the amount of credit that's available to you and the interest rate that you will be charged for that credit.

You should make it a part of your financial plan to check your credit reports from all three of the major credit bureaus once a year. Your score is different at each of them and sometimes things are reported differently at each of them too.

Credit reporting agencies are not perfect, they do occassionally make mistakes. Do you want to pay higher rates because someone made an error on your credit report report?

E. S. Kinnear said "If you cannot make money on one dollar, if you do not coax one dollar to work hard for you, you won't know how to make money out of one hundred thousand dollars."

It's very true. If you are not checking your FICO score atleast once a year, and taking steps to improve it, your money is not working hard enough for you.

When my husband and I were shopping for our home, we found a mortgage broker and got prequalified so things would go more smoothly when we found the home we wanted. They ran our credit reports and everything was fine.

It took us a few months to find the home we wanted. A few days before we went to closing, I got a call from the mortgage broker stating that I had an unpaid balance on an old credit card that had to be paid off or we would not be able to go to closing. They usually run your credit again right before closing.

I asked the broker for a copy of the credit report. I knew I had always paid my bills and when I went through my old paperwork I found that I never even had a charge account with that account number.

But I had to pay it by Western Union two days before we went to closing or we would not have gotten our home.

We were getting married in a few days and we had given up our apartments so we could not wait a month or two for it to be straightened out. It ended up being my sister-in-law's charge card. We had the same first and last name and we lived in the same town.

That can happen to you too, but you'll never know if you don't check. We ended up with a higher interest rate because that item affected our credit score. I did not have alot of credit history, so that one negative item impacted my score alot.

I would have never found out about it, and the importance of being aware of what my FICO score is if we had not been buying a house. I never realized before then that someone else's information with a similar name could end up on my report.

It doesn't have to be a relative, it could be any one who spells their name very closely to yours.

The people who enter this information is are human and they make mistakes. If a person with a similar name skips out on a debt, and a business or a debt collector believe that your name and address coincide with the person who owes them the debt because of similar spelling and you both live in the same area they will report it to the credit agency and it could end up on your report.

I have since started using my middle initial on my legal and financial papers and we do not live in the same town anymore, but sometimes my sister-in-law's information still ends up on my report.

But now I have proof it's not me and lenders usually will disregard it when I fax them that proof.

Now you can request a rapid re-score. If you are making a major purchase or applying for a loan and you have proof that an item is innacuracy or a dispute on your credit report you can get the lender to request a rapid rescore for you.

Your credit score is the number that lenders use to determine what kind of a credit risk you are. It is usually referred to as a FICO score, named for Fair Isaac and Company, the business that developed the formula for determing the score.

Although there are many credit bureaus, the three major credit bureaus, Equifax, Experian, and Trans Union all use FICO scores to make their determinations about your credit worthiness.

You actually have three credit scores, one developed for each of the three major bureaus. For Equifax it is called a Beacon Score, for Experian it is called the Experian Fair Isaac Score, and for Trans Union it is called the Empirica Score.

Although Fair Isaac determines all three scores using the same method, your credit score can differ between the three agencies.

The lenders and businesses that grant you credit can report the information to each bureau differently and then each bureau can interpret that information differently. That is why all three of your credit scores could differ.