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Understanding Your Credit Score and Credit Report
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Where does your score come from?
There are three major nationwide credit reporting agencies (“credit bureaus”): Equifax, Experian, and TransUnion. The Information sent to the credit bureaus becomes your credit report. Credit bureaus then use your credit history to develop a credit score. Your credit history and credit score is then used to decide whether or not to extend credit.
What’s in a credit report?
Credit reports contain detailed information about you and your credit history, including:
- Name, address(es), social security number
- List of creditors, dates, borrowing experience, payment history
- Credit inquiries – when, where, why you have applied for credit
- Public records such as bankruptcies, foreclosures, repossessions or other legal actions
There is a lot of information on a credit bureau which is why checking your report annually is important. One thing that can definitely help you and the credit bureaus is filing legitimate disputes about your report. Keep your credit as healthy as possible by being diligent in keeping your information up to date
What’s in a credit score?
Think of a credit report as being like a report card that lists all of your classes, where the credit score is your GPA. Instead of getting a letter-grade (for example A, B, C, D, or F), you earn a three-digit number, called a credit score which generally range from 300 to 850. The higher your score, the lower the credit risk you are to lenders
Some of the things used by credit bureaus to get your credit score include:
- Payment history
- Amount of outstanding debt
- Length of credit history
- Number of inquiries
- Types (credit cards, loans, mortgages, etc.) of active/inactive credit
Free access to your credit report
Checking your credit is an important task that should be done annually. It’s easier than you think. The Fair Credit Reporting Act entitles you to one free copy of your credit report every year from each of the three nationwide credit reporting agencies. Order online at annualcreditreport.com or call +1 (877) 322-8228
There are also free credit apps for your smartphone that can keep you up to date with your credit health. Credit Karma is a great example. The app does what is called a soft inquiry to check your credit score. This does not count against you in any way and is a great way to keep yourself informed of any changes that happen on your report almost instantly