What Is a Credit Report?

A credit report contains information about your credit history and the status of your credit accounts. It calculates your credit risk by evaluating all of the information in your credit report.

For years, creditors and lenders have been using credit scoring systems to determine whether you are a good risk for credit cards, auto loans, and mortgages. These days, many more types of businesses, including insurance companies and phone companies, are using credit scores to decide whether to approve you for a loan or service and on what terms.

A statistical formula is then used to compare this information to the credit performance of consumers with similar profiles, awarding points for each factor. A total number of points – a credit score – helps predict how creditworthy you are; that is, how likely it is that you will repay a loan and make payments on time.

Generally, consumers who are good credit risks have higher credit scores.

Different lenders use different scoring formulas, so your score can vary from lender to lender.

Usually a higher score makes it easier to qualify for a loan and means a better rate of interest. Lower interest rates usually translate into smaller monthly payments. Most scores range from 300-850, although there is one scoring method that uses a range from 501-990.

Components of a Credit Score

Your credit score starts with information about you from your credit report, such as:
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Payment History
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Amount of Debt
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Length of Credit History
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Types of Credit Used
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Inquiries
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Your Credit Score

Tips to a Higher Credit Score

Things you can do to get and keep your credit score where you want it!
  • Pay bills on time, every time.

    Missed and late payments can show on your credit for years. Make sure you pay all your bills before they are late.

  • Don’t get close to your credit limits.

    Most financial experts recommend keeping balances below 30% of your credit limit.

  • A long credit history will help your score.

    Keeping your old accounts open and active is almost always a positive for your credit score.

  • Only apply for credit that you need.

    Don’t over-extend your borrowing limits by opening accounts you do not need or will not use.

  • Don’t establish too many credit accounts.

    Too many open accounts can be seen as a negative.

How Do I Get & Keep a Good Credit Score?

The basics of credit score improvement.

Your Credit Score is a key factor in homeownership. The quickest way to improve your score is to call your America West Financial Mortgage Consultant.

They will provide a referral to a credit improvement specialist who will indicate the fastest way for you to improve your credit score. It’s the key to making your home-buying experience dreams a reality.

Pay your bills on time, every time.

One way to make sure your payments are on time is to set up automatic payments, or set up electronic reminders. Also try to pay more than the minimum payment if you can. If you have missed payments, get current and stay current.

Don’t get close to your credit limit.

Credit scoring models look at how close you are to being “maxed out,” so try to keep your balances low in proportion to your overall credit limit. Experts advise keeping your use of credit at no more than 30 percent of your total credit limit. Think carefully before closing some credit accounts and putting most or all of your credit card balances onto one card. You may end up hurting your credit score if it means that you are using a high percentage of your total credit limit.

A long credit history will help your score.

Credit scores are based on experience over time. The more experience you have with getting credit and paying your bills on time, the more information there is to determine whether you are a good credit risk.

Only apply for credit that you need.

Credit scores look at your recent credit activity as an indicator of your need for credit. If you have applied for too many new accounts in a short period of time, it may appear to lenders that your economic circumstances have changed negatively.

Don’t establish too many credit accounts.

Although it is generally considered a plus to have established credit accounts, too many credit card accounts may have a negative effect on your score. In addition, many scoring systems consider the type of credit accounts you have; for example, under some scoring models, loans from finance companies may have a negative effect on your credit score.
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