Credit scores…we all have them but most of us do not understand how our scores are calculated. Regardless, effective immediately, your credit score may experience an increase as high as 30 points. This could help you when applying for credit or trying to negotiate a better interest rate.
What May Cause This Increase?
Last July, credit reporting companies removed some civil judgment and tax lien data from credit reports. Now, credit reporting companies have removed the rest, and civil judgments and tax liens will no longer appear on someone’s credit report. This change was made after a study by the Consumer Financial Protection Bureau found problems with credit reporting data. To correct these problems, the credit reporting companies voluntarily elected to remove the civil judgments and tax liens.
According to a prediction by LexisNexis Solutions, about 11 percent of the population had a lien or judgment removed from their credit file which would have resulted in an increase in their credit scores.
Will this help us understand completely how our credit scores are calculated, likely not, but at least it could explain a recent jump in your score. Also, if you are looking for other ways to improve your credit score, please visit our blog post “Helpful Tips to Improve your Credit Score prior to Seeking a Mortgage”.
Why You Should Know Your Credit Score
A credit score will usually determine whether you receive a loan or not and what kind of interest rate the lender will provide to you. You have a good credit score if it is higher than 700 and an excellent credit score if your score is higher than 760. Your credit score is to help lenders determine your creditworthiness.
You are entitled to a free credit report from annualcreditreport.com every 12 months from each credit reporting company: Equifax, Transunion and Experian. If you find incorrect data on your credit report, you should follow these steps.