There are many reasons why your score may not be as high as you expected or where you would like it to be to get the best interest rate. To understand why your score is low you’ll need to get a copy of your credit report from your local credit bureau. Credit bureaus are normally listed in the yellow pages, and a request for the report will take two to three weeks to process. Once you have received the report, you’ll need to review it to determine what is pulling down your credit ranking.
The number one thing you’ll want to look for are any accounts that have late payments, collections, liens or charge offs. These are called derogatory accounts and each account can reduce your credit score by fifty or more points. Be sure that any charge-offs or collections are legitimate, if they are not, make sure you contact the credit bureau with written proof or to prompt investigation.
You’ll also want to review any payments that are showing as late. If there are inaccuracies, again make sure you get them corrected, if the payment is late right now, be sure that you bring it current by paying fees, penalties, in addition to the payment amount. You should be aware that installment loans such as auto, mortgage or any other loans with fixed terms, are considered worse than revolving latest. Credit cards or other accounts which change on a month-to-month basis are revolving accounts.
Next, you’ll want to look at any comments from the credit bureau. These will clue you into other factors negatively impacting your credit rating. Typically comments would be things such as:
- excessive number of inquiries during previous 12 months adversely affected the score
- unknown amount of since delinquency reported
- accounts showing delinquency
- too little time has elapsed since opening of most recent account
- too many revolving accounts carrying balances
- revolving accounts showing high balance to credit
Generally, the comments will help you figure out which situations are causing the reduction in your score and how to address the problem.