Upon checking your credit score, you might feel concerned if it is lower than you expected. A healthy credit history is crucial in getting approved for – and securing a favorable interest rate on – a car loan, mortgage or another credit card. If your credit habits are generally good, you will likely panic if your scores do not line up with your practices. It is crucial, then, to understand how credit reporting agencies compute your score and what you can do if you feel it is inaccurate
The factors affecting your credit score
When calculating your credit score, credit reporting agencies tend to put the greatest weight on your payment history. If you have never made a late payment on your credit card bill, your timeliness will likely keep your score strong. Yet, you might have had difficulty making on-time payments while establishing your credit. If you have made late payments or if you have missed payments, this information will stay on your credit report for seven years.
Your current credit balance will also have an outsize impact on your credit score. By using a low amount of your available credit and paying your balance in full each month, your credit score will likely stay healthy. Your credit score will decrease, though, if you use a significant amount of your available credit and fail to pay your balance.
Several other factors will have a smaller impact on your credit score. The length of your credit history and the amount of new credit you have – as well as the amount of credit you have applied for – could increase or decrease your credit score in a small yet meaningful way. Your credit mix will affect your score, too. Having several different types of credit accounts could demonstrate that you know how to manage your payments.
Making sure your credit score is accurate
The Fair Credit Reporting Act (FCRA) gives you the right to dispute any information on your credit report that you feel is inaccurate. If you notice a mistake that has affected your credit score, you must report it to the credit reporting agencies, along with documentation supporting the specific issue. Credit reporting agencies, then, must correct or delete this information within 30 days of receiving your report. Failing to make these changes is a violation of the FCRA.
If errors on your credit report are impacting your credit score, you will want to fix them as fast as possible. An attorney can work with you to make sure your credit score reflects your credit habits.
