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Your credit score

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POSTED January 2, 2014 9:57 p.m.

 

 


Do you know your credit score? Or how to improve it? The National Foundation for Credit Counseling has joined with Experian, which has donated 80,000 free, 12-month memberships to its FreeCreditScore.com website in order to help consumers not only understand, but improve their credit scores. It's all part of the NFCC's Sharpen Your Financial Focus program aimed at empowering consumers to manage credit wisely.

If you go to SharpenToday.org, you can start with a visit to the "MyMoneyCheck-Up" section of the website, an online financial self-assessment tool. You can also take advantage of a one-on-one review with an NFCC certified financial professional. And then, you can qualify for the free membership that gives you a year of access to not only your credit report and credit score, but to credit monitoring and alerts, and to the Experian ScorePlanner tool, as well.

Your Credit Report. By now, you probably know that you're entitled to a free credit report from each of the three major credit bureaus every year. (The easiest way to access that totally free report is through annualcreditreport.com, which offers direct links to each of the bureaus, without requiring you to sign up for credit monitoring or credit protection programs.) Typically, those credit reports show similar information, because they are simply a compilation of information reported to them by the companies with whom you do business — credit card issuers, mortgage lenders, medical providers and insurance companies.

The information on your credit report will stay there for at least seven years, or 10 years in the case of a bankruptcy. There's not much you can do to change your credit report, except to dispute erroneous items. Other than that, you simply have to live with the facts until they "age off" your report. Until then, any of your previous bad credit moves will impact your ability to borrow, and the cost of borrowing.

Your Credit Score. But your credit score is a number that reflects a snapshot assessment of how risky it is for a company to extend credit to you. There are literally dozens of scores used by lenders for this purpose, and each has its own complicated algorithms (interactions of data). The most popular score, used in 90 percent of lending decisions, is the FICO score (myfico.com) — the original score created by the Fair Isaac Corporation many years ago, when it was rarely disclosed to consumers.

Since then, the credit bureaus and others have created their own scores, which likely range from 350 to 800 (the higher the better), same as the FICO score. Just as your college SAT scores determined where you might be accepted at school, your credit score determines the cost and availability of credit.

Some of what goes into your credit score is simply a matter of record: how long you've lived at the same address, had the same job, held your oldest credit card. There's not much you can do about that. But there are things you can do to impact — and improve — your credit score. And that's what makes Experian's Score Planner tool so useful.

Changing Your Score. At Experian-owned FreeCreditScore.com, you can test your credit score and use the Experian Score Planner for a payment of just $1. (But if you don't cancel within 7 days, you'll be signed up for a membership at $17.99 per month, which includes credit monitoring, fraud alerts and access to fraud resolution agents.) That's the advantage of going through the NFCC at SharpenToday.org and snagging a free one-year membership.

When you sign up for the $1 trial, the credit report information that is behind your score is used to "pre-populate" the slider calculators on the Score Planner tool. The tool is designed to show you how your personal credit behavior impacts the risks that lenders perceive about you as they make and price their credit decisions.

You can move the sliders on your computer screen to see how behaviors such as adding a new credit card, increasing the percentage of available credit you are using, inquiring about opening new credit and making late payments have on your credit score.

Should you ask for your card limit to be increased? Should you apply for a new credit card — or several? Your understanding of how your risk score is impacted by these decisions will help you use your credit wisely. For instance, too many consumer-generated inquiries about getting new credit will lower your score. Some things you do (think late payments) will impact your score quickly. Restoring your score by paying on time could take longer.

Now, as you head into the holiday shopping season, is the perfect time to gain control of your credit. Take advantage of the NFCC program. The credit counseling can be done over the phone, and it isn't reserved for people "in trouble." NFCC wants to help those just starting out, and those caught in a rut of making minimum monthly payments. Going through their counseling program does not impact your credit, and is not reported to the credit bureaus.

So get started today at SharpenToday.org — or by calling NFCC at 855-374-2773. It's free — and that's really the only thing about credit that is free. That's The Savage Truth.

 

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