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Understanding Your Credit Report

Understanding Your Credit Report

Wednesday, February 6, 2019

Read Time: 1 min 18 secs 

What is a credit report? 

A credit report is a detailed report of how you manage your finances.  Companies use this report to verify identity, to extend credit, and to determine loan rates. Also, the credit report is used by landlords, insurers, and employers to determine the applicant’s eligibility for products and services.

The credit report details opened and closed accounts, personal information, payment history, public records, and inquiries. The information on the credit report is collected by credit bureaus. The major credit reporting companies are Equifax®, Experian®, and TransUnion®.

What is a credit score?

The credit score is a component of the credit report. The credit score is a numerical value calculated from information in the credit report. There are multiple versions of the credit score; however, most companies use the FICO® (Fair Isaac Corporation credit scoring model) score to make credit decisions. The FICO® credit score ranges from 300 to 850. Credit scores of 690 or above are considered good scores, and credit scores 720 and above are considered excellent scores.

Your credit score is determined by these factors.  

  • Payment history (35%)
  • How much you owe (30%)
  • Length of credit history (15%)
  • Types of credit accounts (10%) 
  • New credit (10%)

Before applying for a credit card or a loan, the lender will check your credit report to determine your eligibility. It is recommended to examine your credit report at least once a year to check for errors and to dispute unauthorized activities with the credit reporting company. If you are a victim of identity theft, take the necessary steps to dispute the discrepancy and reclaim your identity.  Everyone is legally entitled to one free credit report each year from each of the three credit-reporting companies: Equifax®, TransUnion®, and Experian®

If you spend responsibly, pay on time, manage your accounts, and monitor your credit report, you will be well on your way to having healthy credit and the score to back it up.