You may already know that your credit score plays a big part in your personal finances. At the same time, you may wonder what it means, who decides what your score is, how it really affects your daily life and what things can make it go up or down? All of these are fair questions. And when the economy is on the weak side, like it is today, it’s only logical to be concerned about making your money do as much as it can for you. You can never be sure when you may have to borrow money for an unforeseen event or the purchase of a lifetime, that’s why getting and keeping a good credit score is so important.

So what precisely does the term “credit score” mean?  Basically it’s nothing more than a number that has been assigned to virtually every adult in the US. It is meant to be an objective measure of how risky it is to extend credit to an individual. The lower your score, the harder it is to get a loan, and the more of a negative it can have on other aspects of your life as well. However, if you have a higher score, you will find it easier to get loans, and to get better terms attached to those same loans. You will usually pay lower interest on credit cards, too.

Besides being able to get loan or not, and the getting better terms, credit scores are more recently being used by utility companies, cable companies, insurance agencies, landlords and even potential employers. This can affect your rates, whether or not you have to pay deposit to get service, or if you will be able to rent a place to live. Anybody who has a legitimate need to see your credit report, and credit score can do so if they pay a fee to the credit reporting agency.

What are the elements used to come up with a credit score? The largest determinant of your score is how well you have taken care of your credit and debt in the past. Those who have made all of their payments on time will have a higher score. But those who have late or missed payments will have their scores lowered as a result. Needless to say, a missed mortgage payment is worse than a telephone bill that’s a day late. While bankruptcy is the one event in your life that can have the longest lasting negative effect on your credit score.

Close behind your past credit history in calculating your credit score is the total amount of debt you owe. If your debt-to-income ratio is too high, it shows lenders that you will probably have a hard time keeping up with a new loan. Even they understand that you can only live beyond your means for so long. Another prime factor in figuring out your score is how far back your credit history goes; the longer, the better. Though a long credit history isn’t enough to compensate for missed payments.

Having a co-signer on a loan application can be a good thing.  This can be anyone that you know, like a friend or family member, who agrees to share the responsibility for repaying the loan if you cannot make the payments for some reason.  Usually it is a parent who will co-sign for a child who has no credit or low credit.  It can be a good way to build up your good credit and get the results that you are looking for.  In other cases, the co-signers good credit may help someone with poor credit get a loan that they would otherwise be denied.

We all start out with a credit score of  0.  Having no credit score is almost as bad as having a bad one.  There is no record of your credibility, which is not very convenient if you are a young adult trying to get a loan for a home, car or college education.  Some parents or guardians who  understand the meaning of having credit will put their child’s name on a utility bill and let them  make payments from a job or pay for it themselves.  As long as the bill is paid in full and on time, it will positively reflect on the person’s credibility.  It will be a lot easier to move into the adult world of making a large purchase, like a first home, when you have good credit to your name.

For the person that has managed to make a bad name for himself or herself in the world of credit and they are in need of a loan, they may have to rely on a co-signer to help them out of this jam.  No one wants to be in debt and a family member or friend will be more understanding than the institution from where you want to borrow the money.  A co-signer must have a good credit score and they must be willing to take over the remaining money that is owed on the loan for any reason if the primary borrower cannot make payments.

If you are in debt and you cannot seem to get a break, a co-signer could be what you are looking for.  No matter what your reason for bad credit, it is up to the lender to approve or deny you based on the facts of your credit report.  As long as you know someone who has good credit and enough trust in your ability to repay the loan that you are looking for, you may have a good chance to get back to where you want.  A co-signer is a good way to establish or re-build good credit for you.

If you are checking out your credit report and you see an error what should you do? Wrong numbers on your credit report may bring down your score and you should make sure that you get this fixed right away by contacting your credit agency.

You do not have to pay a lot of money and see someone to get this fixed. You first have to get a copy of your credit report and circle any items you think are wrong and make sure that you inspect it again to make sure there is nothing left off of it.

The next thing that you need to do is write a letter to the credit agency and tell them of all the disputes.  The address for the agency should be listed on the credit report.  You need to be sure that you include copies of any paperwork that pertain to the disputes you are reporting. (Send copies, not the originals. You need to keep those for yourself.)  You should send everything by certified mail and get a receipt to be sure it was mailed out and it was received.

It is up to the reporting agency to investigate your disputed claim and verify that there is a problem with the credit report information.  If the creditor cannot prove that the information is correct, the entry must be removed with no questions asked. It is probably just an error on their part and they will tell the reporting agency about it and it will be removed from your permanent record.  Once the investigation is finished, and the changes are made, the agency will give you a copy of your credit report free so that you have proof that the changes have been made.

There are errors that will occur in all stages of life and it should come as no surprise to learn that credit reports are not any different.  Keep your temper down and deal with the mistakes.  Your credit agency should take care of this and help you with no problems.  It is your responsibility to take care of your credit and to review all the paperwork that you receive all of the time.  If you do not go over them you may not even know if your credit score is being affected by these false entries.