Credit industry specialists often advise millions of American cardholders to review their credit scores to see how they fare when it comes to financial performance. However, not all consumers know what exactly credit scores and ratings are for and how to maintain them. Because of this, experts are stepping up efforts to increase awareness and help cardholders gain better knowledge and understanding of credit scores and ratings.
Analysts are also pointing out a recent trend in the credit industry where card issuers and lenders have raised their expectations of potential borrowers. Consumers today need to have a credit score of 750 in some cases to receive the same treatment they did two years ago with a score of only 700. They explain that the credit crunch and the poor economy are forcing many card companies to be choosy when screening borrowers and applicants.
Fortunately, there are steps that consumers can take to prevent their credit scores from plunging. Having sufficient knowledge of how the three major credit bureaus, Experian, TransUnion, and Equifax determine ratings is crucial for cardholders to have better control of their credit spending.
Knowing how a consumer fares with the three credit agencies is the first step towards better credit scores and ratings. Next, cardholders have to ensure that the information in their credit records is accurate and updated. Most lenders and creditors never bother to verify the data in the consumers' credit reports. Studies have even found out that as much as a third to 40 percent of all credit reports contain errors of some kind. Checking records regularly can give consumers the chance to identify possible mistakes and have them corrected before they affect credit scores and ratings negatively.
Analysts say that one of the most damaging errors often with the credit limits and lines of many cards. The credit bureaus can sometimes make grave mistakes regarding existing credit limits. Because the scores are computed based partly on the debt-to-limit ratios of active cards, having an erroneous lower limit can eventually lead to lower scores.
Being late, even once, in payments can cost consumers dearly. Some experts contend that failing to pay dues even once can shave up to 100 points off a credit score of 750 or higher. The law requires card companies to report cardholders if they are more than 30 days late in paying their balances. Being late in payments for more than 90 days can mean that the resulting damage can remain with the cardholders and their records for years to come, specialists say.