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Credit Scores

A credit score is a complex mathematical model that evaluates many types of information in a credit file.

What is a credit score used for?

A credit score is used by a lender to help determine whether a person qualifies for a particular credit card, loan, or service. Most credit scores estimate the risk a company incurs by lending a person money or providing them with a service –– specifically, the likelihood that the person will make payments on time in the next two to three years. Generally, the higher the score, the less risk the person represents.

How does my credit score affect me?

Your credit score is an important indicator of your financial health. Lenders use your credit score to determine: Whether or not you are a good candidate for a loan, what type of loan you qualify for and what interest rate interest rate you will receive. While your credit score is a key determinant of your creditworthiness, lenders also examine the information on your credit report and your loan application. Regularly checking your credit report enables you to: Be informed of the most up-to-date information in your credit history and to correct any inaccuracies, to make sure that your credit data is a true depiction of your credit record and increasing your chances of receiving credit under the best possible terms

What factors influence my credit score?

Various factors determine your credit score, including the following:

  • Payment history – A good record of on-time payments will help boost your credit score.
  • Outstanding debt – Balances above 50 percent of your credit limits will harm your credit. Aim for balances under 30 percent.
  • Credit account history – An established credit history makes you a less risky borrower. Think twice before closing old accounts before a loan application.
  • Recent inquiries – When a lender or business checks your credit, it causes a hard inquiry and a slight ding to your credit score.
  • Apply for new credit in moderation.
  • Types of credit – A healthy credit profile has a balanced mix of credit accounts and loans.

How do I improve my credit score?

These common guidelines and practices will generally help raise your credit score:

  • Be Punctual - Pay all of your bills on time. Lateness, collections, and bankruptcies have the greatest negative impact on your credit score.
  • Check your credit report regularly and take the necessary steps to dispute inaccuracies. Don't let your credit health suffer due to inaccurate information.
  • Watch your debt. Keep your account balances below 50% of your available credit. For instance, if you have a credit card with a $1,000 limit, you should try to keep the balance owed below $500.
  • Avoid "quick" credit fixes. A good credit score is created over time and reflects a number of interrelated factors.
  • Avoid excessive inquiries. A large number of inquiries occurred over a short period of time may be interpreted as a sign that you are:
    • Opening numerous credit accounts due to financial difficulties.
    • Overextending yourself by taking on more debt than you can actually repay.

What can I do to start improving my credit scores?

Start by contacting Commonwealth Mortgage Group. We will consult with you on how to properly and strategically raise your scores as quickly as possible. If your credit score is a little low, you should pay your bills on time, reduce your debt, remove inaccuracies and avoid new inquiries to give it a boost. Many people who take good credit for granted underestimate the amount of savings that can be realized from a good credit rating. The cost of checking your credit is minimal compared to the amount you may save from what you learn.