For most people, their credit score sits on the back burner. Very few people take an active role in their credit management until a problem arises. This is a bad habit to get into; here are a few reasons why.
Behind The Bureau
Did you know that credit damage is caused by more than missed payments? Do you know how the credit bureaus calculate your score? Or even what they do with your information? There is a lot about credit reporting bureaus you may not have known, until now:
- Your credit score is made up of many elements. Payment history, types of credit, balances owed, limits available, length of credit history and new credit activity all go into the calculation of your score. Missed payments, high balances (especially when a debt-to-limit ratio exceeds 60%) and a short credit history can all negatively influence your score.
- They track more than your credit history. It isn’t just about missed payments and debt balances, they track your personal information like address and employment records too. While this information isn’t used to calculate your score, it is visible to lenders and potential lenders. Further, selling much of this information to potential lenders is how the bureaus make money.
- Reporting mistakes are quite common. It is estimated that as much as one-third of all consumers have one or more mistakes on their credit report, with about 15% of those costing them huge drops in credit score. It is your responsibility to monitor and dispute mistakes on your report with the bureau, which is why monitoring your report at least annually is incredibly important to your future credit.
- Debt collections and bankruptcy aren’t as detrimental as you might think. Many people assume that filing for bankruptcy damages their credit. In fact, the opposite is often true. Resolving high debt-to-limit balances and erasing delinquent payment histories can give you a fresh start at rebuilding a strong score.
Consult with a Tampa bankruptcy attorney about how bankruptcy can help with your credit problem.