What Affects Your Credit Score
Your provides a snapshot for prospective lenders, landlords, and employers of how you handle credit. For any mortgage, car loan, personal loan, or credit card you have had, your credit report lists such details as the creditor’s name, your payment history, account balance, and, in the case of credit cards and other revolving debt, what percentage of your available credit that you have used.
Credit reporting agencies, colloquially known as , also take this information and plug it into proprietary algorithms that assign you a numerical score, known as your credit score. If you do not pay your creditors, pay them late, or have a tendency to max out your credit cards, that kind of negative information is visible on your credit report, which can lower your credit score and may prevent you from receiving additional credit, an apartment, or even a job.
How Does A Lost Or Stolen Credit Card Affect Your Credit
A common misconception about what happens to your credit score when you replace a lost or stolen card with a new one is that the credit card company closes the old account and opens a new one when it issues the new card. Consumers worry about the effect this has on their credit since one of the factors used to determine your score is the length of time accounts have been open. Fortunately, most credit card companies do not close your account. They simply transfer your information, including your account open date and transaction history, to a new account number and effectively merge the two accounts into one.
The most obvious threat to your credit is that the person who steals your card or finds your lost card may attempt to use it illegally. Because your name is on the account, you are responsible for any balance that accumulate. The good news is that most credit card issuers will not hold the cardholder responsible for fraudulent charges. But if you fail to alert the card issuer and do not pay the balance, this gets reported to the and lowers your score.
If your credit card is stolen in the United States, the Fair Credit Billing Act limits the liability of cardholders to $50, regardless of the amount charged by an unauthorized user. In today’s world of electronic fraud, if just the credit card account number itself is stolen and the theft is reported before any charges are made, federal law guarantees that the cardholder has a zero liability to the issuer.
What Are The Benefits Of Using A Debit Card
- Debit cards can make it simpler to track spending. With online portals and smartphone apps, its easy to see transactions almost immediately. This allows you to watch your account balance, track spending and even stay on budget.
- Debit cards are more convenient than cash. As we mentioned, using a debit card can be much safer than carrying around a bunch of cash and not just because a card can be reported stolen or missing and deactivated. Carrying a debit card also means you dont have to go out of your way to withdraw cash from an ATM or local bank branch since you can use a debit card to make purchases almost anywhere.
- Compared to credit cards, debit cards may help you avoid debt and overspending. Credit cards allow you to borrow money that youll pay back later. Because of this, for many account holders. With debit cards, though, youre limited to the cash you have in your account excluding features such as overdraft protection making it easier to track spending and limit purchases.
- You wont be charged interest on debit card purchases. Since you arent borrowing money to pay for purchases when using a debit card, you also wont be charged interest on purchases made. But with a credit card, youll usually accrue interest on the account balance if its not paid in full on or before the statement due date.
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If I Dont Agree With My Fico Score What Should I Do
Your FICO® Score is provided to Wells Fargo by Experian® based on information within your credit report on the calculation date . If you feel this information is inaccurate, your next step should be to request a free credit report from annualcreditreport.com. If theres incorrect information within any of your credit reports, follow each bureaus instructions on how to dispute that information. If theres incorrect information about your Wells Fargo accounts, please call the Wells Fargo phone number in your credit report.
How Will I Know If My Fico Score Is Available
If your account is eligible, the link to View Your FICO® Credit Score will automatically display on your Account Summary screen. Just select the link to opt in and view your FICO® Score.
Note: You can also access your FICO® Score in Spanish with your smartphone.
- Direct your mobile browser to wellsfargo.com or download the Wells Fargo Mobile® app.
- You can update your setting any time on the Language Preference screen. Just sign on to your account, go to the Profile and Settings menu, and select Language Preference.
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Dont Change Houses And Jobs Frequently
Lenders want evidence that youâre a stable character. They want to see you have staying power â that youâre not here one day, gone the next. Put simply, they want evidence of stability so try not to change jobs and addresses too frequently.
Looking to change your home loan? Use our home loan selector tool or call .
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How Your Credit Score Is Determined
Your credit score is a number that represents your creditworthiness and is typically impacted by:
- your payment history
- your credit utilization ratethe total of all outstanding balances you currently owe compared to your total credit limits
- the length of your credit history and the average age of your accounts
- whether youve applied for multiple new credit accounts recently
- your mix of credit
Do Unused Credit Cards Hurt Your Score
Earlier we discussed how a card you got when you were first starting out may be one that you dont use much anymore. But that card is important to two scoring factors: your length of history using credit and your utilization rate.
Your length of credit history is a factor that makes up 15 percent of your overall FICO score. This is really the only portion of your overall score that you have relatively little control overthat is until you decide to close one or more accounts.
Length of credit history is calculated two waysboth by the age of your oldest account and by the cumulative age of all of your accounts. When you are first starting out in the credit world theres no way to magically age your history unless you are an authorized user on someone elses old account.
VantageScore and FICO both will bring the age of the account on which you are an authorized user over to your file and it will score as an oldie. Otherwise, just like your actual age, your credit age can only be as old as it is. If you later choose to close an old account, your closed account continues to be taken into consideration in the score, but only as long as it is still reported .
You must also consider your , which calculates how much of your available credit you have used. While my recommendation is to keep that number below about 25 percent of your overall credit line, people with the best credit scores tend to have a number in the single digits.
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What Is A Credit Score
A credit score is a number that summarizes your credit risk to lenders, or the likelihood that youll pay the lender back the amount you borrowed plus interest. The score is based on a snapshot of your credit report at one of the three major credit bureausEquifax®, Experian®, and TransUnion®at a particular point in time, and helps lenders evaluate your credit risk. Your credit score can influence the credit thats available to you and the terms, such as interest rate, that lenders offer you.
Be Proactive: Monitor Your Credit Report
As it is for medical conditions, early detection is key for handling threats to your credit report before they get out of control. Monitor your credit report closely. The law requires the credit bureaus to allow you to review your full credit report once per year for free. You should do this at a minimum and consider monitoring your credit report quarterly or monthly.
Keeping tabs on your credit report, especially after having a card lost or stolen, gives you peace of mind. It can also preempt the aforementioned situation where the credit card company closes your account after an account review. Often, a person who has this happen was never aware of the derogatory information in their credit report that triggered a red flag with the credit card company. If you always know ahead of time what your creditors see when they look at your report, you can avoid such unpleasant surprises.
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Dealing With Too Many Cards
If you think you may have too many cards or have ones you no longer use, the worst thing you can do is start closing accounts without considering the impact on your credit score. Closing older credit cards can shorten your credit history, which can hurt your score.
Payment history on closed accounts eventually falls off your report, which can also hurt your score. Closing credit card accounts also reduces the amount of available credit, which can hurt your debt-to-credit ratio or credit utilization if you have outstanding balances.
It’s better to leave your credit card accounts open and just put these cards on ice. If you get a warning about inactivity from the card issuer, use that card just a bit to prevent the account from being closed. You can also keep that credit card as a backup, especially if it comes with a higher interest rate or a higher credit limit. Keeping this one in the wings can help you keep costs down and, if it has a higher limit, can keep your spending in check.
When To Use A Credit Card
It may be best to use a credit card if you want to:
- Improve your credit score: Using your credit card a few times a month on purchases that you can pay off in full each month could increase your credit score over time.
- Earn reward points: If you have a credit card that earns rewards points or cash back on certain purchases, your purchases may result in accumulation of rewards points, miles or cash back.
- Avoid overdraft fees: As long as you stay within your credit limit, you won’t have to worry about overdraft fees.
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What Is The Fastest Way To Build Credit
The fastest way to build credit is to open a credit card, make payments on your credit card account, and keep your account balances low. Within just a few months of responsibly using your credit card, you could build a decent credit score in the low 700s. That said, you should make sure to make all your payments on time.
How Does Refinancing Impact My Fico Score
Refinancing and loan modifications may affect your FICO® Scores in a few areas. How much these affect the score depends on whether its reported to the consumer reporting agencies as the same loan with changes or as an entirely new loan. There are many reasons why a score may change. FICO® Scores are calculated using many different pieces of credit data in your credit report. This data is grouped into five categories: payment history , amounts owed , length of credit history , new credit and credit mix . If a refinanced loan or modified loan is reported as the same loan with changes, two pieces of information associated with the loan modification may affect your score: the new credit inquiry and changes to the amounts owed. If a refinanced loan or modified loan is reported as a new loan, your score could still be affected by the new credit inquiry and an increase in amounts owed, along with the additional impact of a new open date which may affect the credit history category. In the end, a new or recent open date typically indicates that it is a new credit obligation and, as a result, may impact the score more than if the terms of the existing loan are simply changed.
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Does The Fico Score Im Seeing Reflect My Most Recent Payments
Scores reflect data from your Experian® credit report at the time it was calculated and may be from a previous period. All lenders have their own reporting schedule, so you should allow 30-60 days from the time of any payments or other activity for that activity to be reported in your credit report and then reflected in your FICO® Score. If you believe your FICO® Score is incorrect or doesnt reflect your most current activity, the first thing you should do is check your credit report. You can check your credit report from each of the three consumer reporting bureaus once per year for free at annualcreditreport.com. If you see an error or a particular lender has not reported your latest activity to the credit bureau, follow each bureaus instructions on how to dispute the information or contact the lender directly. If you see an error associated with a Wells Fargo account, call us at 1-855-329-9605, Mon Fri, 7:00 a.m. 7:00 p.m. Central Time.
How Debit & Credit Cards Affect Your Credit Score
How much do you understand about using debit and credit cards? Will it hurt your credit score to close out a credit card? Does using a debit card help you build your credit? Weve got the answers to help you take charge of your credit.
First, its important to know whats involved in a good credit score. The most important credit score when youre trying to get financing for a loan like a mortgage or an auto loan is the FICO score. The FICO score is based on the way you manage your credit, and takes into account the following factors:
- Payment History: Paying bills on time is important because this makes up 35 percent of your credit score.
- : This makes up 30 percent of your credit score, and its based on how much of your credit youre using. Its generally recommended to use only about 30 percent of your available credit.
- Length of Credit History: Accounting for 15 percent of your credit score, this is the reason many people dont want to close credit card accounts. The longest-held accounts help your score more than new accounts, because they give a better indication of your payment pattern.
- New Credit: Ten percent of the score has to do with new accounts, so try not to apply for a lot of credit in a short period of time.
- Mix of Credit: The final ten percent involves your mix of different credit accounts like credit cards, retail accounts, finance company accounts, mortgage loans, and installment loans. A good balance looks good for your credit score.
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What Is A Debit Card
A debit card is a payment card that makes payments by deducting money directly from a consumers checking account, rather than on loan from a bank. Debit cards offer the convenience of credit cards and many of the same consumer protections when issued by major payment processors such as Visa or Mastercard.
There are two types of debit cards that do not require the customer to have a checking or savings account, as well as one standard type.
- Standard debit cards draw on your bank account.
- Electronic benefits transfer cards are issued by state and federal agencies to allow qualifying users to use their benefits to make purchases.
- Prepaid debit cards give people without access to a bank account a way to make electronic purchases up to the amount that was preloaded onto the card.
Frugal consumers may prefer to use debit cards, because there are usually few or no associated fees unless users spend more than they have in their account and incur an overdraft fee. By contrast, credit cards generally charge annual fees, over-limit fees, late payment fees, and a plethora of other penalties, in addition to monthly interest on the cards outstanding balance.