Credit Reports
A credit report is actually a history of your credit. It's full of data from various sources of financial information. The reports information lists things such as: who you owe money to (utilities, hospitals, landlords and others), if you are late in making payments, your bank if you overdraw your account or do not make credit card, auto loan, or mortgage payments on time. Your credit report may also contain information about delinquent child support payments.Personal information is also in your credit report, such as: your Social Security number, name, phone numbers (even if it's unlisted), address, recent previous addresses, birth date and info on your employment history. Your credit report also contains subjects of public record such as bankruptcies, tax liens, and civil judgments.
Today the credit reporting industry is run by three large national credit bureaus: Equifax®, Experian®, and TransUnion. The bureaus run about 1,300,000,000 credit reports each year, and each of the three has around 225,000,000 consumer credit records.
A credit report also includes a credit rating (your FICO score) FICO scores go from about 300 to 850 with an US average being around 725. FICO scores that are above 720 are considered to be a 'good' credit rating. Any score that falls below 600 is considered to be a rather poor rating.
Why is a credit report important?
Since the majority of financial decisions you make in your life will use the details of your credit report in some regard, it's very important.
At the most basic level it will be used to determine if you will be granted credit, to a lesser degree it may be used to determine the rate you
pay for mortgages, loans and even insurance. Let's say you wanted a $200,000 mortgage over a 25 year span. Having a better credit score could
land you a better rate of anywhere from 1-3%. That means over the 25 years you would save about $70,000 in interest.
How can I improve my credit rating?
Even though there are small differences between the way your FICO score is calculated, the basic formula is as follows:
- 50 percent on your payment historyand on the total amount of time you have had a credit history.
- 30 percent on the amount you owe.
- 10 percent on the number of new types of credit you have requested.
- 10 percent on the kind of credit used.
Now you know that to improve your FICO score you need to pay your bills in a timely manner, lower the total quantity of debt you have, limit your requests for new credit and steer clear of high-risk credit.
What else can I do?
You should access the credit bureau-operated http://www.annualcreditreport.com. to acquire a free copy of your credit report from every credit
reporting agency. In the U.S.A. a federal law the FACT Act (Fair and Accurate Credit Transactions Act), entitles each legal U.S. resident to one
free copy of their credit report from each credit reporting agency once every twelve months. However, this report does not contain credit scores.
Look over your personal details for mistakes, such as your name being incorrect, wrong address or Social Security numbers, etc.. In addition, you should review your financial info for things like loans showing a balance is due even though it has been paid off and credit cards or other accounts you previously cancelled. The more accurate your reports are, the fewer questions a lender will ask, so report all errors and have the mistakes rectified as soon as possible.