Each year you can receive a free credit report from each of the credit bureaus. If you can’t remember the last time you peeked at your report then it might be time to take a look at the current state of your credit.
Credit scores and your credit history affect your interest rates, amount of credit available to you, rental options and job prospects. Keeping up to date and understanding what you can control will help when it comes to you and your credit. Here are seven items on your credit report and what they mean for you.
1. Available Credit and Credit Utilization
On your credit report you will be able to see just how much of your available credit you’re using. What percentage of your credit cards haven’t you had to use can be an esteem-boosting exercise if you have been trying to pay down your debts.
A rule of thumb is to use less than 30 percent of your available credit and probably the best option is to use a little bit of credit, but stay below 20 percent. It may be safer to use credit for small purchases so you’re sure you can pay it off that month rather than only use credit for large purchases which are harder to pay off before the next finance charge.
2. Credit History
Take a walk down Memory Lane with that first store credit card you used to save 10 percent on that day’s purchase and 5 percent thereafter. A list of addresses where you have lived and plenty of other artifacts of day’s gone by are also there to review. Nostalgia aside, the importance of your credit history is that you have one and that you have paid off your debts on time and as agreed.
Checking to make sure everything is accurate is a necessary step, but also make sure to review any trends you may be able to find if you have had late payments or other marks in your past. The big picture can help you figure out what gives you trouble when it comes to credit.
3. Negative Entries
There’s a slew of ways to get into trouble with credit, but there are also specific negative entries that are reported. Late payments, foreclosures, collections, tax liens other public record items and bankruptcies will sit on your report for at least 7 years. The older they are, the less they will hurt, but a negative entry can tag along with your newer good credit habits. There are ways to dispute negative entries so they come off sooner, but that process may involve the creditor and the credit bureau.
4. Age of Credit
Credit ages like a fine wine. The older the better. If you have credit cards or other lines of credit that have been open from the beginning of your credit history, all the better. Having accounts that have been open for years with the same creditor shows that not only are you creditworthy but you’re also reliable enough that they have kept credit open and available for when you needed it over a long period of time.
Would you like to know who has been asking about you? Don’t worry about hiring that private investigator, your credit report will show you who has inquired about your credit report and score. Lenders, employers, landlords, or even yourself might have been asking to see what your credit looks like.
6. Credit Score
Although this isn’t included with your free annual credit report, there are free ways to find it or a reasonable facsimile if you aren’t willing to pay for it. Your score will range from 300 – 850 and is simply a measure of how likely you are to pay back your credit. Start at anything under 600 as bad credit and you’ll reach fair credit as you approach 700. Good credit is above 700. Excellent credit is above 750, give or take what you’re looking to do and the temperament of your loan officer.
7. Interest Rates
What does all this information mean for you? Basically, it determines how much credit is available to you. A few thousand dollars on a credit card, sure. An entire mortgage maybe not so much.With better credit comes higher credit lines and lower interest rates. With loans of any length, even a slightly lower interest rate will save you money over the life of the loan. The easiest way to not have to haggle over price and interest rates is to have excellent credit.
If you have credit card debt that has made your credit report look less than pristine, then take advantage of a FREE debt analysis. It can help prioritize your debts so you can pay them off faster and make headway on getting your credit under control.