Have you seen your credit report recently? For that matter, have you ever seen your credit report or requested your credit score? It’s really important to review your credit report at least once a year and to know your credit score. Your credit score governs how much interest you pay on a credit card, an auto loan or personal loan or even your auto insurance premium. If you have a good credit score of 750 or above, you will always be able to get the credit card you want and an auto loan at a decent interest rate. If not, you will be charged a higher interest rate on all the money you borrow, including even a mortgage.
How to get your credit report
There are three credit-reporting bureaus. Each of them pulls information from all the companies and financial institutions that have granted you credit. When you apply for new credit, the relevant credit bureau uses your credit report to create your credit score to create your credit score – on the fly. In other words, you don’t have a standing credit score. It is a variable that changes as your credit report changes.
Are you among the 20%?
There was a another study recently showing that only about 20% of consumers (44 million) ever get free copies of their credit reports. You can get one copy free from each credit bureau once a year or go to the site www.annualcreditreport.com and get all three simultaneously – again free.
The impact of your credit card history
Each credit-reporting bureau has its own algorithm or formula for calculating your credit score. However, the Consumer Financial Protection Bureau (CFPB) released a study last month showing that your credit report is dominated by your credit card history. It found that about 58% of the information in your credit report comes from credit card providers, 18% from retail credit cards, 40% from bank cards, 7% from mortgage companies and 4% from auto lenders. In other words, how you treat your credit cards is critical because it will have the most impact on your credit report and ultimately your credit score.
If you’re wallowing in credit card debt
If you’re so heavily in debt you’ve been unable to make even the minimum monthly payments on your credit cards or are skipping payments on a personal loan, there’s not a lot you can do short term. Your credit score has probably already been lowered or soon will be. But there are things you can do longer-term to get back on track.
Consumer credit counseling
One of the most popular ways to deal with serious debt is to go to a consumer credit counseling agency. If there is not one in your town, you can easily find one on the Internet. The best of these agencies are nonprofits and either provides their services free or very low-cost. The way this works is that you will have a credit counselor will help you develop a payment plan and then present it to your creditors for approval. He or she will also work to get your interest rates reduced to help you get out of debt quicker. If all of your creditors approve your payment plan you won’t have to pay them anymore. Instead, you will send one check a month to the credit-counseling agency, which will take the responsibility for paying your creditors. This can have a positive effect on your credit score, assuming you make your one payment a month regularly and on time.
Another popular way to get credit debt relief is through debt settlement. This is where a company such as National Debt Relief negotiates with your creditors to get your balances and interest rates reduced. Our debt counselors normally get our clients’ unsecured debts reduced by 50% or better and help them become debt free in 24 to 48 months.