Your credit score isn't like your high school GPA. It is important, it never stops being evaluated and it will take into account when you don't turn in your homework/payments. Four out of every five credit reports contain errors, according to the National Association of State Public Interest Research Groups. Many of these errors have a negative effect on your credit score. Why should you care? Your credit score will be used by many people during your life. A landlord will check it before renting to you. An employer may check it to see what type of employee you may be. Insurance companies will set your premiums based on it. And most importantly, lenders will use it to decide whether or not to lend you money. The higher your score, the better a borrower are you. If you have a low score, your credit may not be sufficient enough to help you secure a loan. Low scores equal higher interest rates and less favorable terms. Higher scores make applying for credit a breeze. A low credit score can actually cost you tens of thousands of dollars over the life of a mortgage. For example, if you have excellent credit, you may get a $200,000 fixed-rate, 30-year mortgage at 6% interest. Bad credit could mean that you must pay 8% interest, or an additional $90,000 for the same 30-years and $200,000. But credit scores are constantly changing, so you can change your score by taking some simple steps. Start by lowering your debts by paying off as much as you can. You may want to consider closing a few of your open accounts as you pay them off. If you have a large number of open accounts, you may appear to be over-extended. Some lenders worry that you may go on a spending spree and not be able to pay for it. Pay all of your bills on time, every time. This is one thing, that given time, will raise anyone's credit score. You simply pay everything on time. So simple. Yet, it really works. Just give it time. Make sure that you check your credit report at least once a year for any false information. Take action to remove any negative items as soon as possible. Negative information can really drag down your score, so by removing it you are raising your score. But it does have to be false to remove it. If you find a false item on your credit report, gather the information you will need to dispute it. This could be any type of proof of payment. Contact both the lender and the credit agency by telephone and certified letter. Include any proof that you may have. If you suspect fraud, you should immediately contact the credit agencies -- TransUnion, Equifax and Experian -- to take protective measures for your credit. Your credit score will follow you throughout your life. While no one really checks what your high school GPA, everyone will check your credit score. |
