Expert Interview: Understanding Consumer Credit Report Scores

Mary Gormandy White
Jamie Frampton of Mortgage Team One
Jamie Frampton shares expert advice on consumer credit rating scores.

Are you wondering what do consumer credit reports rating scores mean? Jamie Frampton of Mortgage Team One shares her expertise about credit score with readers of LoveToKnow Credit Cards.

Why Are Credit Scores Important?

A credit score estimates the risk a company or lender incurs when it lends money. More specifically, a credit score represents the likelihood that you will fail to pay them in the next two to three years. A higher score represents less risk. Scores are calculated by a mathematical equation that evaluates many different types of information that is found in the credit report.

What Factors Impact an Individual's Credit Score?

Several factors have an effect on a person's credit score, including:

  • Payment History: Covers your entire history of credit. It will include payments on your current and past credit accounts. If you have been late more than 30 days, it may be reflected on your credit record and could lower your score.
  • Public Records: - Matters of public record such as bankruptcies, judgments, and collection items will also lower your score.
  • Amount of Debt Owed: - Owing too much on revolving accounts (credit cards) can lower your score, especially if you are close to your credit limit.
  • Length of Credit History: - In general, the longer or deeper depth a credit history contains the better the score (if it does not reflect late payments).
  • New Accounts: - Opening multiple new accounts in a short period of time may lower your score.
  • Inquiries: - Whenever someone else pulls your credit or obtains your credit report - for example, a lender when you apply for a department store card - there is an inquiry on your credit report. A large number of inquiries within a short period of time (six months) may lower your credit score.
  • Accounts in Use: - The presence of too many open accounts can lower your score whether you are using the accounts or not.

How Can a Person Go About Improving His or Her Credit Score?

If you want to improve your credit score, there are several steps you can take, including:

  • Do not open new credit cards that you do not need just to increase your available credit. This approach could backfire on you and actually lower your score.
  • Try to keep your balances on revolving accounts as low as possible. (It is recommended to keep your balance less than 50% of your available credit; 30% if at all possible.)
  • Correct any incorrect information that might appear on your credit report.
  • If your credit is severely damaged, or you have a very short credit history, there are still ways to improve your credit over time. Consider opening a new installment account and paying it off on time.
  • If you fall behind due to an illness, unemployment, or family issues, write an explanation to the credit reporting agency and contact the lender immediately to make a payment schedule.
  • Minimize the number of inquiries on your credit report and do not apply for cards just to get a discount on your purchase.
  • Make all of your payments on time. The longer the length of time from the late payments on your credit report, the higher the score.
  • Create a budget and stick to it.
  • Do not close your oldest revolving accounts. This is important, because credit depth increases your score.

What Should an Individual Do Upon Finding Errors on His or Her Credit Report?

You'll quickly find out what do consumer credit reports rating scores mean if there is erroneous information in your file. Don't delay taking steps to correct your credit report as soon as you notice problem. If you find an error, you will need to contact all three major credit bureaus:

Credit Bureau Contact Information

  • Experian
  • PO Box 2002
  • Allen, TX 75013
  • 888-397-3742
  • www.experian.com/reportaccess
  • Transunion
  • PO Box 1000
  • Chester, PA 19016
  • 800-888-4213
  • www.transunion.com
  • Equifax
  • PO Box 740241
  • Atlanta, GA 30374
  • 800-685-1111
  • www.equifax.com

LoveToKnow Credit Cards would like to thank Jamie Frampton for taking the time to explain what do consumer credit reports rating scores mean, and wishes her continued success in her mortgage consulting career.

Expert Interview: Understanding Consumer Credit Report Scores