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What Is A Credit Report And Why Is It Important

Maintain And Defend Your Scores

Credit Score: Why is it important?

You have a lot to lose once you have good scores, generally 690 or above.

A single skipped payment can knock more than 100 points off your numbers. Consider putting all your credit accounts on auto-payment to prevent such a lapse.

A collection account or lawsuit judgment can dent your scores as well. Stay on top of medical bills, since many go to collections with little notice.

Identity theft can devastate scores, a good reason to monitor your credit report. You can get free credit report information through NerdWallet, updated weekly. You are currently entitled to a report from all three credit reports once weekly; not all information shows up at each bureau, but most does.

What Personal Details Do Not Affect My Credit Score

Now that you have an idea of what goes into your score, it’s good to know what doesn’t factor into your score. A recent survey from the Consumer Federation of America found that out of 1022 adult respondents, 40% believed marriage status influenced credit scores, while 43% thought age also played a part.

Your score is a representation of how you manage financial responsibility, not a testament to you as an individual. Things like age, ethnicity, religion and marital status are excluded in the calculation of your score. Your employer, salary and occupation are likewise not included in the equation.

Closeclosewhich Credit Scores Matter

The importance of a from a credit reportYour credit report reveals many aspects of your borrowing activities. All pieces of information should be considered in relationship to other pieces of information. The ability to quickly, fairly and consistently consider all this information is what makes credit scoring so useful. This is the value of FICO Scores.

Read Also: How To Make My Credit Score Go Up

Will My Score Be The Same At All Three Credit Bureaus

The three major credit bureausTransUnion®, Experian and Equifaxare responsible for collecting and maintaining consumer credit reports in the U.S. These reports are then provided to subscribers, such as landlords, mortgage lenders, credit card companies and others who are deciding whether or not to extend you credit.

It can be confusing when your score seems high but you still get denied for a new line of credit. Chances are you’re not looking at the same score as your bank or finance company. Subscribers dont work with every credit reporting agency, so the credit report information included in one report might be slightly different from that in another.

Check your credit scores and reports from each bureau annually to ensure all the information is accurate. By law, you’re entitled to one free annual credit report. You should also use a credit monitoring service year-round. TransUnion offers some of the latest and most innovative credit monitoring services, like;Credit Lock and Instant Alerts. These services will help you spot inaccuracies, potential fraud and other blemishes that could lead to higher interest rates.

Whats A Good Business Credit Score

What is a Credit Score and Why is it Important

Business credit scores range from zero to 100, with most lenders requiring a minimum business credit score of 75. The Small Business Administration , potential lenders, and your suppliers rely heavily on your business credit score when extending lines of credit and determining payment terms. Having a strong and healthy business credit score can help you in obtaining financing and on more favorable terms.

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Why Don’t My Free Credit Reports Include Credit Scores

Your credit report and your credit score are not the same thing. Your credit report contains information that a credit reporting company has received about you. Your credit score is calculated by plugging the information in your credit report into a credit score formula. You may have multiple credit scores based upon who provided the score, and whether the company providing the score used their own scoring model or used a model available from a third party.

Federal law gives you the right to ask for a copy of your credit report from each nationwide credit reporting company every year for free. However, the law does not require the credit reporting companies to provide a free credit score.

Why Is It Important To Check Your Credit Report

Today, our credit reports are used to make many decisions about our financial future. This includes auto insurance rates, employment opportunities, ability to rent a home or apartment and, of course, whether we can obtain a home, car or credit card loan. ;It is critical to protect this very important asset by checking it, at least, annually. Below are some other reasons to check your report and some common things to look for when reviewing it.

  • Make sure that only accurate information is on the report. It is very common for credit reports to contain errors. You dont want an error to prevent you from getting the best rate on a car loan, home loan, or credit card do you?
  • So you know what the lenders will see. If you are applying for a loan or credit card, you should know what is in your report before the lender requests it. This helps you prepare to answer questions about information contained in your report.
  • To protect yourself from identity theft or fraud. When you check your credit report look for:
  • Inquiries to see your credit report from creditors that you did not authorize.; Sometimes creditors will look at your credit in order to offer you credit. If you see this type of inquiry on your credit report, be sure to check the account section of the credit report to see if an account was opened.
  • Addresses or names that you do not recognize

Read Also: Does Closing A Credit Card Hurt Your Score

How A Credit Report Is Compiled

Credit reports are maintained by businesses known as ” or “credit reporting agencies.” There are three major credit bureaus in the United States:

  • Equifax
  • Experian
  • TransUnion

Public records information on your credit report used to include civil judgments, tax liens, and more, but it’s only included bankruptcies since 2017.

Other types of businesses, such as utility companies, don’t usually update your credit report with your monthly payments, but they might notify the credit bureaus if you fall seriously behind with your payments or if your accounts go into collection. Your cable bill isn’t automatically included in your credit report, but it might be listed there as a debt collection if you fall more than six months behind.

Health care facilities don’t report debt directly to the credit bureaus, but unpaid medical bills can appear on your report if a collection agency becomes involved. Medical providers might turn your account over to a collection agency if it becomes significantly past due, but all three credit bureaus will wait six months before putting medical debt on your credit history, to give you time to resolve the problem.

How To Get A Copy Of Your Credit Report

Why a Credit Score is Important

To obtain a copy of your credit report, youll need your Social Security number, date of birth, and addresses for the last two years.

Youll need to answer personal security questions like, In which county did you live in 2008? or Which address is not one of yours?

Once you open your credit report, youll see personal information, including your Social Security number and any previous names, addresses, and phone numbers that youve had.

Youll also be able to look through your credit card accounts. This will indicate whether you are current or delinquent on any payments.

The report will also list which accounts have been closed. Any inquiries made on your report will be there, too, along with your debt. Thats how credit reporting works. If you find that your , there are companies that may be able to help you.

Youre entitled to one free report per bureau every 12 months, available only at AnnualCreditReport.com. Unless you plan to apply for a loan, you may want to space out the requests over the course of the year. That way, you can monitor any unexpected changes.

Additional reporting by Kelly Meehan Brown.

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What If Im Shopping Around For Loans

If youre looking for a new loan, you might be considering working with a number of different lenders, searching around for the best rates and terms. However, upon reading about hard inquiries, you might be worried that this savvy shopping move might actually be detrimental to your score.

Fortunately, FICO understands that this is common practice, and will therefore count all hard credit inquiries happening in a short period of time as rate shopping and only log it as one instance of a hard inquiry.

Should I Pay Off A Judgment That Is Showing Up On My Credit Report If I Do And It Is Marked Paid What Will This Mean

At Credit.com we will always advise you to pay off your debts, delinquent or otherwise. If you have a judgment on your credit report then it serves you well to pay it off. Heres why:

  • Lenders with whom you want to do business will look upon a paid judgment more favorably. As a matter of fact, some lenders will require that you pay off delinquent obligations before they will approve your loans. You might as well do it sooner rather than later so you look proactive rather than reactive.
  • Since credit scoring is used in almost all of your credit transactions its in your best interest to maximize your scores by paying off your past due obligations.

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Should I Worry About My Credit Inquiries

What Is A Credit Score And Why Is It Important?

Generally speaking, even if you do have a handful of hard inquiries in a short span of time, the effect they have on your overall score will be minimal. Inquiries will have a greater impact on your score the shorter your overall credit history is; the fewer items and events there are playing a role in determining your overall score, the greater the weight each action will have on your overall score.

And the impact the inquiries have on your credit score will not last forever. As Experian notes, a hard inquiry will remain on your record for two years at the most and will only be factored into their FICO algorithm for 12 months.

While credit inquiries are not something you should be losing sleep over, it is worthwhile to understand what they are and how they affect your overall credit score. Being mindful about how you apply for financing will allow you to avoid unnecessary damage to your credit score from excessive hard inquiries.

Also Check: How To Get My Own Credit Report

Dont Close Your Old Credit Accounts

Part of your credit score is calculated by the age of your credit report and the age of the individual credit accounts you have in your report. If you have old credit cards or lines of credit you dont use, resist the urge to close them. As long as you keep them open, they will positively impact your credit score as they age.;

Use that old credit card or line of credit once or twice a year to keep it active, then pay the balance off in full. If youre worried about fraud on an account you dont use often, you can use Borrowell to monitor your credit report for free.

Whats A Good Credit Score

So, what is a good credit score, anyway? Lets start at the beginning.

According to the Government of Canada, a credit score is a 3-digit number that represents how likely a credit bureau thinks you are to pay your bills on time.1 It can be an important part of building your financial confidence and security.1 For example, building a good credit score could help you get approved for loans and larger purchases, like a home.1 You may also be able to access more competitive interest rates.1

There are two main credit bureaus in Canada: Equifax and TransUnion.1 These are private companies that keep track of how you use your credit.1 They assess public records and information from lenders like banks, collection agencies and credit card issuers to determine your credit score.1

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Keep Your Excellent Credit Score

When you have increased your credit rating, youll need to make sure you practice other tips for maintaining excellent credit. These tips for keeping a good credit score include paying every bill on time , using credit only when you need to, limiting your new accounts, keeping old accounts open, and mixing up your types of credit with a combination of credit cards, loans, retail, and mortgage accounts. Also, make sure your credit mix includes revolving, installment, and open lines of credit.

Improving or increasing your credit rating isnt an easy task, and it will take some time. However, as long as you know what youre working with, youll be able to say you have a great credit score and qualify for the best rates available, in no time.

Disclaimer: This site contains affiliate links from which we receive a compensation . But they do not affect the opinions and recommendations of the authors.

Wise Bread is an independent, award-winning consumer publication established in 2006. Our finance columns have been reprinted on MSN, Yahoo Finance, US News, Business Insider, Money Magazine, and Time Magazine.

For example, Wise Bread has partnerships with brands including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi, Discover, and Amazon.

Are There Any Legitimate Ways To Repair Your Credit And Credit Scores

What is a Credit Score & Why is it Important?

It depends. According to the Fair Credit Reporting Act you have the right to ask that the information on your credit reports be verified as accurate and not outdated. The credit bureaus have 30 days to complete the verification process or they must remove or change the information to coincide with your dispute. Credit repair companies may assist you in writing and that is something that you can do on your own, for free. It is sort of like cleaning your gutters or changing your oil. You can do it yourself for a fraction of the costthe question is, do you really want to?

From this point forward is where it gets a little fuzzy. Disputing data that you know to be accurate isnt considered a legitimate dispute. And, the credit bureaus are likely to validate it as accurate and leave it on your reports. There are no surefire methods for repairing accurate credit data that you simply dont want on your credit reports.

Beware the company or individual who guarantees that they can remove delinquencies or create a new credit report in your name. These are not legitimate practices and are illegal in most states.

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What Is A Credit Score The Complete Guide For Canadians

What is a credit score? Basically, its a 3 digit number that stands between you and other peoples money. When you apply for a loan, you are asking to borrow money that doesnt belong to you. A loan is an investment, and every investment comes with risk. Investors trust lenders to assess risk before lending out their hard-earned money to strangers. Lenders are basically bouncers,; deciding who can or cant access money, how much they can access, and the interest rate.;

Your credit score is like a ticket to a money club. It tells lenders whether or not you have a; VIP pass with bottle service, or if you should wait in line for general admission. Or maybe your ticket is bogus and you cant even get past security. But what is a credit score and how is it calculated? Weve got everything you need to know about your credit score in Canada.

What Is A Fico Sbbs Credit Score

Unlike Dun & Bradstreet, Experian or Equifax, FICCO technically isnt a credit bureau. Instead, the FICO credit score comes from information that the three major credit bureaus have already gathered.

The FICO score is also known as the LiquidCredit Small Business Scoring Service . Banks and lenders typically use it when making decisions on the approval of Small Business Administration loans and other similar credit applications for amounts up to $1 million.

The FICO score comes from data on the business and owners personal credit history alongside other information such as the revenue, assets and age of the company. FICO will assign a score of between 0 to 300. The higher the score, the lower the financial risk the business poses. Many lenders set a minimum FICO SBBS credit score of 160 to pass the SBAs pre-screen process.

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Why Is Credit Important

When consumers and businesses can borrow money, economic transactions can take place efficiently and the economy can grow. Credit allows companies access to tools they need to produce the items we buy. A business that couldnt borrow might be unable to buy the machines and raw goods or pay the employees it needs to make products and profit.

How Information In Your Credit Report Affects Your Credit Scores

Why Good Credit Score Is Important And How You Can ...

Except for your personal information, everything listed in your credit reports has the potential to affect your credit scores, with payment history and credit utilization being the two most important factors.

Lenders like to see a healthy combination of well managed accounts, such as credit cards, an auto loan and a mortgage, so a good credit mix can positively affect your credit score as well.

Your credit report can help you understand information that affects your credit scores, and can be the basis of a plan for credit-score improvement.

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