The Basics of Credit Scoring
During the 1980's, the credit scoring system became a popular method of evaluating potential borrowers. With its ability to accurately predict financial risk over time, more and more companies and institutions began to use the credit scoring system. Today, credit scoring is used by a variety of people and businesses for determining creditworthiness.
There are thousands of credit evaluation needs, and consequently there are thousands of different credit scoring formulas. Online credit scoring uses an algorithm designed to approximate these formulas. Because of this, your online credit scores can vary from the scores your potential lender uses. However, both credit scores should be in the same range. More information on credit scoring can be found by following this link: Credit Scoring 101.
There are several methods for managing your credit rating. Due to the fact that late payments, collections and bankruptcies have the most negative effects on your credit, it is important to be punctual and pay your bills on time. Regularly checking your credit report from each of the three main credit bureaus, TransUnion, Equifax and Experian, can help you manage your credit and correct any inaccuracies. A 3-in-1 Credit Report from TrueCredit will give you a comprehensive view of your credit information for all three of these agencies.
If you do find inaccuracies, be sure to report them to the creditor or the credit agency that is reporting the incorrect information. Another action that can have a positive effect on your credit scoring is maintaining account balances below 50% of your available credit. This means that if you have an account with a line of credit up to $1,000, you should try to keep the balance owed on that account below $500.
A long credit history can also have a positive impact on credit scoring. With a long history of paying your bills on time and responsible use of credit, lenders will be more likely to extend loans or other forms of credit at favorable interest rates. Over time, following this advice can help you make sure your credit is the best it can be. Click here for other tips on managing your credit rating.
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