Wednesday, March 18, 2009

Credit Scores: What You Need to Know

By Mei Ling Lin

Many American don’t know their credit scores before they apply home mortgage, so that some of them would have trouble when they finance for home mortgage.

What do you need to know your credit scores? Credit scores, usually refers to the FICO score, and is a number based on a formula developed by the Fair Isaac Corporation. It would look at a summary of all your credit accounts and payment history, which include the MasterCard or Macy’s card payment. The way to determine you credit score is: 35% is calculate by your payment history, 30% is based on the amounts you owe each of your creditors, 15% is based on the length of your credit history, 10% is based on how many accounts you have recently opened compared with the total number of your accounts, and the last 10% is determined by the types of credit used.

However, consumers should check their credit report carefully, because up to 3% of the report contains errors reported by the Consumer Data Industry Association. Some of consumers don’t know there are errors on their credit reports, until their creditor tell them. Because they don’t check their credit report or correct the errors before they apply the home mortgage.

To stop this problem and improve the credit score, consumers should control their credit scores. How? First, go to get your credit score report and check each items carefully, if you find any error on the report, you should contact the creditors as soon as possible to fix it. Second, make your payments on time. If you have trouble to remember to send your bills, try to use automatically transfer. Third, redefine your debt and beware of retail cards, because the retail cards may hurt your credit score, if you open many accounts in a short time.

source: #1 #2 #3

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