Guide to Understanding and Improving Your Credit Score

Your credit health plays a big role in your financial future. Strong credit health can help you qualify for loans with low interest rates, saving hundreds or even thousands of dollars in the long run.

In this guide, you’ll get a simple breakdown on your credit score and how you can start building your credit health so you can get more out of life:

• Credit Score Definition
• Credit Reports
• How Your Credit Score is Calculated
• The Factors that Impact Your Credit Report
• What is a Good Credit Score? What’s a Bad Score?
• Why Your Credit Score is Important
• Top Tips to Achieve an Excellent Score
• Credit Repair: Steps to Fix a Poor Credit Score

Credit Score Definition

Your credit score is a three-digit number that sums up the information in your credit report, and many lenders use this metric as a way to determine your credit health. Credit scores are calculated by an algorithm that scoring agencies use based on information from your credit report, which includes data like your loan payment history and credit card balances. Credit scores were designed to predict the likelihood that you can meet your payment obligations or that you will go delinquent on your payments.

Credit Report

Credit reports are comprised of the data and information that each credit bureau collects from lenders.  There are dozens of credit bureaus in the U.S. that produce consumers’ credit reports, however, the main credit bureaus that are used by the majority of financial institutions and businesses to check consumers’ credit are Equifax, Experian, and TransUnion.

• Credit History: the number and type of opened, active and closed accounts you have (credit card, auto loan, mortgage, etc.), age of credit accounts, credit utilization rate, the account balances and your payment history including the number and severity of late payments.
• Credit Inquiries: when you apply for credit and the lender performs a “hard” pull of your credit report, it will appear on your credit report as a “voluntary” or “hard” inquiry. This is different from “involuntary” or “soft” inquiries which happens when you check your rate online or when lenders pull your report to make you a pre-approved offer in the mail. Only hard inquiries are visible to other people, and they can impact your credit score for up to one year but will appear on your credit report for up to two years. ¹
• Public Records and Collections: information on overdue debt from collection agencies and can include bankruptcies, foreclosures, suits, wage garnishment, and liens.
  

  How your Credit Score is Calculated

  Credit bureaus collect millions of pieces of data that scoring agencies and others crunch to create credit scores. But how do they get all this data?

  How your Credit Score is Calculated

  Credit bureaus collect millions of pieces of data that scoring agencies and others crunch to create credit scores. But how do they get all this data?

• https://www.upgrade.com/credit-health/insights/complete-guide-to-credit-scores/