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Even though your credit report influences just about every aspect of your financial life, most people have never even seen theirs, let alone know what their FICO or credit scores are. Not only will understanding your report help you make important financial decisions, it can also help you see just what it is that is keeping you from getting the credit that you may need.
It is a document that includes all your pertinent personal and financial information. It contains your full legal name, your social security number, previous and current addresses, date of birth, and current and previous employers.
This report also includes information about any financial accounts you have now or have had in the past. This includes any loans, credit cards and their credit limits, monthly bills, and so on. It also includes information regarding judgements, tax liens, bankruptcies, overdue child support, etc. This information can stay on your credit report for up to seven years, in some cases longer.
The information is collected by all three major credit bureaus, Equifax, Experian (formerly TRW), and TransUnion. Any time you apply for credit of any kind, the lender contacts one of these credit bureaus to obtain a copy of your credit report.
Basically your credit score is based on a mathematical formula that reflects all the information on your credit report. The end result is called your FICO Score. FICO stands for Fair, Isaac, and Company, the organization that developed the scoring technique.
Your credit score is a number between 300 and 850 that tells creditors how likely you are to pay your bills. The higher the number, the better it looks to potential lenders and creditors.
The three major credit bureaus each have their own version of the FICO score: Equifax uses the Beacon system, TransUnion uses the Empirica system, and Experian uses the Experian/Fair Isaac system. Despite each credit bureau's use of their own versions, all systems are based on the original Fair Isaac FICO scoring method.
Your score is influenced by your financial history. Consistent late payments on monthly bills, and any collection action that has been brought against you negatively affects your score. Your credit score determines not only the decision to give you the loan or credit card, but also the interest rate you are charged. The higher your credit score, the lower your interest rate and vice versa.
How much outstanding debt you have is also a factor. This includes the outstanding balance on any loans you may have as well as the credit limits on any credit cards you may have.
Anytime you apply for a loan, credit card, or anything that requires an institution to request a copy of your credit report, it will be noted on your credit report.
The length of your credit history is also a factor. Having no credit history can work against you. With nothing to go on, the creditor doesn't know how you will handle your credit.
Your credit score influences all your financial decisions. If your credit is less than perfect, you may be turned down or at least given a higher interest rate. So taking care of your report, and keeping your credit clean will save you money.
Knowing and understanding your credit report is vital to getting a mortgage, debt consolidation loan, car loan, and even renting an apartment or getting a job. That is why it is so important that you keep track of your score and read your report regularly.
So if you have never seen your credit report, we recommend you get a copy and check it over thoroughly.
Maintain
Your Good Credit History
Don't
close your old accounts. Part of your credit score is based on the
amount of credit available compared to the amount of credit used.
Closing old accounts increases your debt to available credit ratio and
that will hurt your credit score.
Improve
Your Poor Credit History
If
you have a poor credit history, there are things you can do to improve
your score. The largest factor in determining your FICO score is your
payment history. The first thing to do to start repairing your credit
history is to pay your bills on time. The mortgage is the most
important, followed by instalment loans, and then credit cards.
If you are struggling with overwhelming bills, credit cards, student loans, you should consider debt consolidation. We have a great deal of information that can help you consolidate debt, consolidate student loans, consolidate bills, consolidate credit card debt, and help you with bad credit debt consolidation.
Use Credit Repair to Remove Errors
Inaccurate
information may well cause you all sorts of unexpected problems. Get a
copy of your credit report from all three primary agencies, and look at
all the entries. You can find the agencies here: experian.com,
equifax.com, and transunion.com.
First, check to make sure it is your credit record that is on your report. Then check the report's accuracy and look for errors and omissions. If there are any problems, start the credit repair process to have them corrected.
Always be aware that you are protected by consumer laws. In the case of your credit report, the credit reporting agencies must adhere to the Fair Credit Reporting Act.
All credit bureaus are required to give you a free credit report each year. You will need to provide your name and address as well as your social security number and date of birth to identify yourself, as well as possible former addresses if you have moved recently.
You do not have to get all three of your free reports at the same time. You can stagger them over the one year period. Also, if you receive notice that you have been turned down for credit, you are entitled to a free credit report if you request it within 60 days of the notice.
Make use of your entitlement, check your report and see if there is anything that could be causing you a problem. If there is then you can use credit repair to help clear up any errors or inaccurate information.
Even a few points difference in your credit score can mean confronting the reality of the loss of thousands of dollars out of your pocket -- a loss that you probably didn't plan for. Getting, reviewing and correcting your credit report if necessary will save you time, frustration and maybe a great deal of money.
There is only one place where you can get your FICO score from all three bureaus and that is at www.myfico.com.
Click Here To Get Suze Orman's FICO® Kit!