What Information is in a Credit Report?

Since your credit score is based on information in your credit report, it is important to know what your report contains. Your name, address, social security number, date of birth and employment will be listed on your report to identify you and are not used in determining your credit score. Your report also includes:

1)      Trade Lines – These are your credit accounts, which  include loans, mortgages, credit cards, and other credit accounts you’ve opened. Your report lists the type of account you have, when you opened it, its credit limit, the account balance, and the details of your payment history.

2)      Requests for your credit – These are also known as credit “inquiries.” There are two kinds: hard inquiries and soft inquiries. When you apply for credit, you are giving authorization to the lender to view your credit history. Your report will list everyone who viewed your credit report in the last two years. This is known as a “hard inquiry” or “voluntary inquiry” and can affect your credit score. On the other hand, “soft inquiries” or “involuntary inquiries” are ones that you didn’t initiate. This includes when you check your own credit reports and scores or companies that request your report to make you a preapproved credit offer. Soft inquiries don’t have an impact on your credit score.

3)      Public records and collections – These can include collection accounts, bankruptcies, tax liens, foreclosures, lawsuits, and judgments. These public records are taken from state and county courthouses, as well as collection agencies.

There are time limits on how long certain information should show on your credit report. Although positive information can stay indefinitely, negative information including late payments, foreclosures, and collection actions, must be removed after seven years. Bankruptcies can be reported for ten years. Inquiries should be removed in two years. To ensure a more accurate credit score, make sure you review your credit report and see if all the reported information is correct.

All this data is collected and stored by credit bureaus, which are private, for-profit companies. The three largest credit bureaus in the U.S. are Equifax, Experian, and TransUnion, and they sell information about you to lenders. Since not all lenders report information to all the bureaus, if you were to get copies of your credit reports from the three bureaus on the same day, you’ll probably notice a few differences among them. For example, the balances showing up on an account might differ from bureau to bureau. Therefore, because your score is based on information that is in your credit report, your score will also be different depending on the bureau you use. You can get a free copy of your credit report annually from each of the three largest bureaus at a single site: www.annualcreditreport.com

To check your FICO credit score, visit MyFico.com

How Do I Get My Credit Score?

Although U.S. residents are entitled to get free copies of their credit reports annually, this doesn’t include the right to free credit scores. The credit bureaus can and do charge for those.

Real FICO Score

Some credit bureaus sell credit scores to consumers that aren’t based on the FICO formula, but are claimed to still be good indicators of a consumer’s creditworthiness. However, these results can differ from the FICO numbers that lenders typically use. This can cause a problem for you because the scores you paid for may be different from the actual score a lender is using to evaluate your creditworthiness. Most credit bureaus do not go out of their way to tell people that the scores they’re selling aren’t the FICO scores most lenders use. Sometimes, these scores can vary as much as a hundred points from the FICO score. Hence, if you are paying for your credit score, be careful and make sure you are getting a real FICO score.

The FICO score has a different name at each of the credit reporting agencies, but they are all developed using the same methods by Fair Issac.

Credit Bureau                       FICO Score Name
Equifax                                     Beacon Score
Experian                                  Experian/Fair Isaac Risk Model
TransUnion                            FICO Risk Score, Classic

One of the places to get your credit score is www.MyFICO.com, a joint venture between Fair Isaac and Equifax. When you get your FICO score, you can also get a summary of the major factors that are affecting it. Understanding these factors can help you improve your score.  For example, a notation that your balances are too high is a hint for you to pay down your debt.

As a precaution when getting your credit score online, check to see that you have a secure connection before you reveal any private financial information, such as your social security number or credit card numbers.

What is a Good Credit Score?

Why is a Good Credit Score Necessary?

A credit score is a three digit number calculated from your credit report and is used to determine your creditworthiness. A good credit score is crucial for financial independence and success. Not only can it make a difference between whether you are approved or denied for a loan, but it has a huge impact on how much interest rate you will be charged if you are approved. This can mean saving tens of thousands of dollars throughout your lifetime if you have a good credit score!

What is a Considered a Good Credit Score?

Thus, one common question many people have about credit scoring is what lenders consider as a “good” credit score. Although the higher your credit score is, the better, there is no single cutoff. What is considered a “good” credit score depends on the scoring system used by each lender. The lender makes its own decision about where to draw the line, based on how much risk it wants to take.

FICO scores range from a low of 300 to a high of 850. Instead of having a cutoff to approve or deny credit, lenders will have different rates and terms at different segments. Many lenders use scores above 700 as the cutoff for giving borrowers their lowest rates, and others may even use scores above 660. These scores typically suggest that you have good credit management, giving you the ability to negotiate for the best rates. Companies that lend borrowers money below that cutoff are often known as “subprime” lenders.

Since all the lenders can have different standards on what they consider to be a good credit score, it is important to keep building your score to receive the lowest interest rates. Understand the factors that affect your credit score and work to maintain a high credit score. You can check your credit score at MyFico.com.