NJCLASS Solutions keeps you in the right credit direction with Real Money 101 credit tips!
Having good credit is one the most strategic economic goals a person can have. Establishing and maintaining good credit will help you realize your financial goals which may include buying a car or home, applying for credit card or even an NJCLASS loan. Here is what you need to know:
What will you see on your credit report?
Your credit report includes four important areas of information:
- Personal: Name, address, Social Security number, date of birth and employment information
- Credit history: Types of accounts, the date you opened the account, your credit limit or loan amount, the account balance and payment history
- Public records: Bankruptcies, foreclosures, garnishments, legal suits and judgments
- Inquiries: List of creditors that accessed your credit report in the last two years
How is your credit score determined?
A credit score is a result based on a snapshot of your credit report that helps a lender, such as HESAA, determine your ability to pay back debt (your score = your credit risk). FICO® scores are widely used credit scores and are based on the following factors:
- Payment history: Looks at items such as late payments and bankruptcies. These defaults can hurt your credit score.
- Amounts owed: Considers your debt and your available credit lines. The more you owe compared to your credit limit, the lower your score will be.
- Length of credit history: Checks how long you had your credit accounts and how often you use them. A longer credit history will usually increase your FICO® score.
- New credit: Looks at new credit accounts you opened and new credit requests (such as credit cards). Multiple credit requests represent greater credit risk.
- Types of credit used: Considers how many credit accounts and how many installment-type accounts you have. A diverse credit portfolio can strengthen your report.
What does your credit score mean?
The ranges below are examples of credit scores; in most cases you will have a credit score that is Excellent, Very Good, Good, Fair, and unfortunately Poor and are for illustrative purposes only. Credit decisions may be based on many other factors.
Why Credit Scores May Differ
Consumers may purchase their credit score from a credit reporting agency or through a credit monitoring service. This score may be referred to as an "educational" score. The score may not be the same score used by a lender in evaluating a loan application.
Credit scores are used to predict credit performance. There are many credit score models in use in the marketplace and the results from each model may be different. It is good to understand why credit scores are used, and the factors that go into calculating a score, but recognize that the score you buy may not be the score your lender uses. Differences in credit scores may be due to:
- a particular lender may use a different scoring model than the one purchased by the consumer, or
- the credit reporting agency used by the consumer to purchase their credit score is not the same credit reporting agency used by the lender, or
- the underlying data in the consumer’s credit report changed significantly between the time the consumer purchased a score and the time the lender obtains a score for that consumer, or
- not all data furnishers provide data to all credit reporting agencies, or
- data furnishers may provide information to the different credit reporting agencies on different schedules, or
- a credit reporting agency will only have records of inquiries that it has received.
Monitor Your Credit
- Request a free copy of your credit report on an annual basis. AnnualCreditReport.com is a centralized service for consumers. It was created by federal law and implemented by the three nationwide consumer credit reporting bureaus: Equifax, Experian and TransUnion.