Your Credit Score

Credit Score

Today, your most important score could be your credit score. That's because it can determine the interest rate you pay to finance a new practice, car or home, and may even affect your ability to get hired as an associate. More employers—including hiring D.C.s—are checking the credit scores of potential employees. Read on for more about the importance of your credit score.

What is a credit score?

A person's credit score, typically a number between 300 and 800, reflects the credit history detailed by a person's credit report. It offers a snapshot of a consumer's credit risk and rates the likelihood that the consumer will repay debts. It includes information about loans and credit accounts, court documents, and financial actions, such as bankruptcies, liens or foreclosures.

Having a low credit score—700 or so is the midpoint—can have a negative impact on your finances.

How can I improve my credit score?

If your credit score is lower than it should be, you'll want to do what you can to improve it. Here are some tips from the WSJ:

  • Pay your bills in full and on time. Missing payments or paying the minimum amount due will lower your score. Your history of making payments accounts for 35 percent of your overall credit score.
  • Don't overuse your credit. In other words, don't max out your credit cards. In general, it's better to carry smaller balances on several cards than a larger balance on one card.
  • Build up a lengthy credit history. So, you won't want to automatically close out old credit card accounts since this can extend your credit record. Also, by keeping some accounts open, you'll help lower the balance-to-limit ratio.
  • Income-sensitive repayment – monthly payments based on the borrower's annual income
  • Avoid opening new accounts. Taking out new lines of credit raises red flags because it makes you look riskier. That's why it's usually best to avoid those retailers' cards during the holidays.
  • Make sure your report is accurate and correct any errors. Often, credit reports can omit important bill-payment information, and sometimes they contain errors. Keep in mind, though, that correcting errors requires patience, follow-through and lots of correspondence.

How do I check my credit score?

It is a good idea to check your credit bureau report annually. You can obtain a free copy of your credit report by going to www.annualcreditreport.com or contact the three major credit-reporting agencies directly (see below).

The credit reporting agencies receive information from many different lending sources. Certain credit bureaus have more information than others depending on the regional location and to whom lenders report their credit information. Experian, for example, may have a larger file on a given borrower than will Trans Union because of the geographic location and who reports information to them.

Information remains on your credit bureau report for seven years, except bankruptcies, which remain for 10 years. If there is an error in your credit bureau report, you can request the credit bureau to correct it. If there is an item in dispute or you feel an explanation needs to be put in your record for an item, there are rules and regulations governing what and how disputes and information can be added to your record. All three of the credit reporting agencies have web sites you can visit to request information, get a copy of your report, and find out what must be done to correct any discrepancies.

The three major credit-reporting agencies are:

Equinox  – www.equifax.com

Experian – www.experian.com

Trans  – www.tuc.com

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