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Simply put, your credit report is documentation of your financial
reputation and your credit score is basically a computed opinion of your
credit worthiness based on how the financial actions reflected in your credit
report compare to the financial actions of statistically financially
responsible people.
Companies use your credit score, which is found in your credit
report, along with information from you (usually on an application) to
determine how much risk they will be taking if they do business with you.
While credit reports are primarily used to determine your likeliness of repaying a
debt, they are also used by employers, insurance companies, landlords and even
judges as a measure of your character and responsibility.
Credit reports and credit scores are NOT products of the government.
Instead, they are created and maintained by private companies known as credit
reporting agencies or credit bureaus. There are three nationwide credit
reporting agencies that keep records on consumers. These three credit
bureaus are Equifax, Trans Union and Experian.
The credit bureaus collect the information that is found in your credit
report from lenders, creditors,
insurers, courts and employers that you have dealt with. The credit
bureaus
then sell the information in your credit report to companies that use it to
evaluate your applications for credit, insurance, employment or renting a home.
The Report
A credit report from any of the three credit bureaus will have the following
information:
- A credit score (you can order credit reports with or without your credit
score)
- Personal information about you (name, address, birthday,
employment, etc.)
- Consumer statement (an optional statement prepared and submitted by you to
the credit bureau)
- Account histories (your performance in using and paying
back your debts)
- Public records (civil judgments, tax liens and
bankruptcies)
- Inquiries (a list of who has looked at your credit report recently - also
referred to as a "hard inquiry")
- Creditor contacts
Every 30 days or so, your creditors report
your activities to one or more of the credit bureaus. This allows the credit
bureaus to continually update your credit file so that your credit score will
always reflect your current situation. Your most recent activity is
weighted more heavily than older activity. Old negative records will stay on your credit report for
7-10 years. Positive records can remain on your credit report longer.
Not all creditors report to all three credit bureaus and the
credit bureaus obtain their data independently so your credit reports from Equifax, Trans
Union and Experian could be very different from each other. Also, each reporting agency has its own
way of calculating your credit score so your credit score from Equifax, Trans
Union and Experian will vary as well.
Even though others maintain your credit report, you can still maintain some
level of control by monitoring your own credit reports and making sure the
information in them is correct. There are companies that will routinely
monitor your credit reports for you and notify you of any changes you should be
aware of. Daily, weekly or quarterly monitoring isn't for everyone so at
the very least you should plan to check your own credit reports from each of the
three credit bureaus every 6-12 months to ensure that
the information is accurate and up-to-date.
The Score
As we said before, your credit score, which is found in your credit
report, is a number used by companies to gauge your financial
responsibility. Just about every financial action you make is reflected in
your credit score so it is wise to keep your eye on it, but try not to become
obsessed over obtaining "the perfect credit score".
There are many factors that are used to determine your credit score.
Knowing them will help you make financial choices that will reflect positively
on your credit score. Take a look at this article:
Factors That
Influence Your Credit Score
Getting Your Credit Report Online
There are many ways to get your credit report online but you should know that everyone is entitled
to at least one free credit report per year from each of the three credit
bureaus. However, if you are smart, you can get a free online credit report AND 30
days of credit report monitoring. You must sign up for a 30-day free
trial, but if you cancel before the 30 days is up, the report and the monitoring
will cost you nothing. If you decide to keep the service, you will be charged a
small fee for the credit monitoring service.
See Article:
How to
Compare Credit Report Monitoring Services
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