Many financial managers recommend that consumers check their credit reports annually. This is a free process. This is a great idea. It is also a great idea to correct any errors made. This should be on the top of your "To Do" List. It is important to know the specific areas on your report.
Payment history
One of the most important pieces of data that makes up a credit report is the payment history of accounts you have. This shows how late payments are treated. Your score is affected by late payments. The frequency and severity of these payments will affect your score. Consumers with a positive payment track are those who pay their bills on schedule.
Paying your bills on time is the best way to improve your payment history. This may mean making some sacrifices but it is essential to build a positive history of payment. Even if you have several accounts, try to make sure that you pay your bills on time each month. You may find it helpful to use autopay or to set up reminders on your calendar to remind you to pay your bills. If you're having difficulty paying your bills, it may be time to review your spending habits.
Length of credit history
Credit score is affected by how long your credit history has been. Your credit score will increase the longer you have had it. This is calculated by looking at the average age of all your accounts. You will see older accounts on your report more frequently than you see newer accounts.
Calculating the length of your credit history involves adding all accounts together and subtracting the years from the accounts. You can cut your history's average length by half by opening a new bank account. Also, opening a new account will result in a hard inquiry to your credit report. When you apply to credit, be aware of this hard inquiry. A hard inquiry can lower your score considerably, so it is important to act quickly to recover.
New credit
When you're applying for new credit it's important that you know the types and extent of any inquiries that may appear in your credit report. While it's possible to make several inquiries at one time, credit scoring mavens tend to count them as one if they are made within a certain time period, which can vary from fifteen to 45 days.
Types of credit
Credit files provide a detailed history about your borrowing habits. Each consumer is kept separate files by credit agencies. Lenders and merchants use this information to evaluate your risk. These data are used by credit bureaus to determine your risk and give you credit scores.
Age of the account
Your credit score could be affected by the length of your credit histories. The longer your credit history, the higher your credit score will be. The average age of your accounts is divided by the number you have to calculate account age. You should also have a mixture of old and new accounts. This will show how you have handled different types of debt. The two credit score models that use this information are FICO and VantageScore.
A common error people make when interpreting account age is misinterpretation. Account age is affected by many factors. It is important to understand the implications of each factor on your credit score.