Many people don’t understand how credit works. To be honest, you usually don’t need to know much to still make good decisions for your credit and to build up a good score, but you can be much more effective if you learn the basics. Studies show that consumers who took credit literacy courses lowered their revolving debt by an average of $6,000. Knowledge in this area really does have tangible results in improving your financial situation. April is Financial Literacy month, and it’s the perfect time to learn more about how your credit score affects your life, how it’s calculated, what you can do to improve it, and other great financial behaviors.
Ultimately, the best way to become literate in anything is to do your research. This simple guide will give you a good overview of the basics about credit, but after that you could benefit by diving deeper into the subject. Of course, it is a good idea to start small. After reading this guide, take a look at these sources:
The first thing you need to understand about your credit score is where it comes from. There are many consumer credit bureaus out there, but the three biggest ones that lenders turn to are Equifax, Experian, and TransUnion. These companies examine your financial information to create reports that record your credit history. It is important to keep in mind how these bureaus gain the information their reports are based on. This happens in three ways:
Another aspect to the way the bureaus work is that your credit reports may differ slightly depending on the bureau. This is because the three credit companies may have varying information about you. Not all financial information is required to be reported, and many creditors only report it to one or two of the three major bureaus. Additionally, it may be helpful to understand that there are many different bureaus, each using slightly different standards. The Consumer Financial Protection Bureau offers a useful list of these bureaus, organizing them by their differences. The most important thing to remember is that these bureaus’ reports determine your credit score, which affects how likely you are to be approved for loans.
Now that you have an understanding of the basics, you can start learning about how you can manage your credit score. To start, consider the different aspects that are used to calculate your score in the first place:
You can get a free credit report once a year. This is a great way to keep tabs on your progress.
With your credit report in hand, read through the information on it and make a list of everything that you don’t recognize or that you know is inaccurate. If there is any negative information that is inaccurate, it is likely hurting your credit score. If you challenge these items and they are removed, it can help boost your score.
Of course, this may be simpler said than done. It is possible for you to handle this yourself, but this is also what CreditRepair.com does. Allow us to take care of challenging the negative inaccurate items. Due to our extensive experience in the field, we can identify areas of improvement on your credit. If the bureau can’t prove that the items are accurate, it is required by law to remove them. By working with CreditRepair.com, you can be confident that your credit repair needs are being handled.
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