8 Little Known Credit Score and Credit Report Facts

Cash is quickly becoming a thing of the past, being replaced by plastic and virtual payment methods. Credit cards are now everyone’s new best friend. Along with a credit card comes a credit score and credit report, which leads to the first thing you may not have known.

 

1. Credit scores and credit reports are not the same thing.

Yes, they are two different things. Credit reports include information such as how frequently you apply for credit, data about your credit accounts, your payment history, a few public records, debt collection and a few other related points. Credit scores, on the other hand, are calculated based on the data found on your credit report.

 

2. Specific employers check credit scores.

Did you know that applying for a job in certain industries will most likely cause your credit score to be checked by your potential employer? These industries/jobs include the armed forces, Transportation Security Administrators (TSA), law enforcement, financial planners/accountants, mortgage loan originators, and, believe it or not, parking booth operators.

 

3. You could catch a criminal!

By keeping a close eye on your credit report, you can see if someone runs up a massive credit card bill or draws out credit in your name. If there is an unanticipated change, contact your bank or lender immediately. You may be able to stop a scammer from stealing someone else’s credit information.

 

4. Identity theft can affect your credit score.

Over 8 million people are victims of identify theft each year in the United States. Believe it or not, hundreds of millions of hours are spent each year trying to find the problem, halt the fraud, and wipe credit reports clean. This is yet another reason why it’s crucial to keep a close watch on any changes in your credit report.

 

5. Seven is the magic number.

After about 7 years, negative information will be eliminated from your credit report, with the exception of bankruptcy (find out how long your bankruptcy will show up on your credit report here.)

 

6. Maxing out is not as fun as it sounds.

Did you know that maxing out your credit card can lower your credit score anywhere between 10 to 45 points? Aim to keep your debt to income ratio between 28 – 33% (this means that your monthly debt and spending is no more than 33% of your total monthly income).

 

7. Closing out an account is actually a bad idea.

Are you aware that closing credit card accounts can damage your credit score? Even if you only use the card once or twice per year, keep the credit card active. Your credit score will be more positively influenced the longer you keep the account open. A longer credit history, which determines 15% of your credit score, makes you look more responsible, and will boost your score.

 

8. Five Factors

There are five factors that go into formulating your credit score, also known as your FICO score. Your payment history makes up about 35% of your score. This is why it’s so important to make all of your monthly payments on time. Responsible for 30% of your score is how much you owe, so don’t leave debt hanging on your card. Your credit history length is responsible for 15% of your credit number. Accounting for 10% of your total credit score is your last application for credit (how long ago it was, what type of credit and the amount). The final 10% is calculated based on the types of credit you use.

If you have more questions about your credit score and/or report, please check out our many other blog posts on the topic. Happy reading!

 

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