Your credit report, which contains a running list of any credit accounts you hold, is a key component in your qualifications to receive a loan, a mortgage, a new credit card, even getting a job and renting an apartment. Understanding how your credit report works is as easy as remembering these 10 simple facts so you are better prepared to get the credit you need and keep good credit.
1. All consumers have a credit score which ranges somewhere between 300 and 850. Your credit score is the number assigned to you based on all of your accounts and tells creditors whether you are considered a credit risk with a score close to 300 or a safe consumer to extend credit to with a score of over 800.
2. Each of the three major credit reporting agencies, Equifax, Experian and Trans Union have their own version of a credit score. Each credit reporting agency will compile a different score for you based on the information in each of their reports. Not all three of your reports will be the same, so your score from each reporting agency will more than likely fluctuate.
3. Your credit report and your credit score are not the same. Your Credit score is the numerical value assigned to you based on the information contained in your credit report and your credit report is a compilation of your credit history over a ten year period that reports everything about you including where you live, your credit accounts, your payment history and even, in some instances, your employment history.
4. Your credit score and the information on your credit report can change on a monthly basis. Because your score is based on your credit history, your score is fluid. If you are timely about payment one month and the next month you use all of your credit and fail to make timely payments, your score will fluctuate.
5. You are entitled to one free credit report a year from each of the three major credit reporting agencies. Under the Fair Credit Reporting Act, you are allowed to request one free copy of your report annually from any credit reporting agency. The 3 main reporting agencies have created a website that allows consumers to obtain their reports at www.annualcreditreport.com.
6. You can improve your credit. Bad credit does not stay with you forever. You can improve your credit by continuing to make timely payments and paying off accounts. Your negative credit history can only be reported for 7 to 10 years and the older an account gets the less is affects your score.
7. Your credit score consists of 5 factors: your payment history, amounts owed, length of credit history, new credit, and types of credit used. These factors are listed in order by the percentage they affect your score.
8. Your credit score will be affected every time a creditor accesses your report. Applying for credit means a creditor will be looking at your report. Each time a creditor accesses your report your score will take this application into account.
9. Your credit score will not be affected when you access your own report. You are entitled to review your report at any time or all the time without any effect to your score.
10. You must actually charge on your credit cards to build your credit history. If you want to build your credit, charge only what you can afford on your card and make sure to pay off the balance in full every month.
If you are having problems with your credit and need the advice of counsel, contact SmithMarco P.C. for a completely free case review.