How You Can Use the Credit Bureaus to Your Advantage
Your credit score and credit history report are both very important because they both affect your ability to take out a loan or a line of credit in the future. Your credit history is a direct reflection of how you’ve paid your bills for the last seven years, including credit cards, auto loans, mortgages, rent, utilities cell phone bills and more, while your credit score is calculated based on the items on your credit history.
Here is some basic information about the credit bureaus and how you can use them to your advantage:
The Basic Roles of The Three Credit Bureaus
There are three credit bureaus that banks, employers and other entities use to determine financial and employment risks: Equifax, Transunion and Experian. All three normally report identical information because financial companies report your payment information to all three every month.
Each bureau calculates your credit score based on separate algorithms. The algorithm takes a number of factors into account when determining your score, including payment history and how many late payments are in your history, the length of your credit history, the percentage of debt you carry in relation to your credit limits, court judgement history and more.
Each bureau maintains a scoring system between 350 and 850, with 680 being around the average score and 850 being the highest score you can achieve. Whenever you apply for a loan, want to move into an apartment or in many cases, get a job, your credit score and history will be examined.
Using the Bureaus to Improve Your Credit Score
Unfortunately, there is no magic wand that can be used to make negative information disappear. In most cases, late payments and collections will stay on your history
for between five and seven years, while bankruptcies can stay on credit histories for up to ten years.
Use the information in your history that’s in your credit history to make the following positive changes:
- On-time Payments: Make sure that you make every payment on time. Check your history to determine whether any late payments have been put there incorrectly.
- New Credit Opportunities: Often times, the credit bureaus will maintain relationships with banks that can help you get your credit back on track. Use some of the credit card offers found on their websites that you think you might qualify for.
- Payment and Removal of Collection Accounts: Make sure to pay off any collections that still remain on your history. If it’s been longer than seven years and they still appear on any of the three bureaus, contact each of them separately and file a dispute to have them removed. In most cases, the bureaus will remove them within two to four weeks.