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What’s your credit grade? Checking your credit report and credit score

October 24, 2008

Based on my conversations with many people, it seems like there is some confusion when it comes to credit reports and credit scores. There is a difference between the two.

Remember when you were in school and you got progress reports and semester grades? Think of your credit report as a progress report and your credit score as your letter grade.

Your credit report is a detail of your credit history and how well you’ve managed credit. It shows who your creditors have been over the years, how much credit you have taken out and whether or not you’ve paid your creditors on time. Your credit report also reflects when you have opened new lines of credit and if any creditors have recently reviewed your credit report.

It is important to check your credit report on a regular basis to make sure there are no inaccuracies. You are entitled to a free copy of your credit report each year from each of the three credit reporting bureaus (Experian, Equifax and TransUnion). You can access a copy of your free credit report by visiting www.annualcreditreport.com.

Your credit report does not include your credit score.

Each of the credit reporting bureaus uses an algorithm to calculate your credit score. The score is based upon information in your credit report. It is common for your credit score to vary from credit bureau to credit bureau.

Credit scores can range from a low end of 300 to a high end of 850. The higher your credit score is the more likely you are to be approved for a loan and to get a better interest rate.

Unlike your credit report, you have to pay for your credit score. This typically costs about $15 per score from each credit reporting bureau.

It isn’t really necessary to pay for your credit score unless you are planning on taking out a long-term loan like a mortgage, car loan or large personal loan. If you are planning on taking out a large loan, it is helpful for you to know your credit score before you begin shopping for a lender.

If you find that your credit score is on the lower end, you may want to hold off on your purchase and try to improve your credit score. If not, you should be prepared for the possibility that your loan could be denied, or that you will pay a high interest rate.

The keys to increasing your credit score are to pay your bills on time, avoid opening new lines of credit and paying down your debts.

There are companies out there that promise they can erase negative information from your credit report. In general, negative items (such as a charge off or a bankruptcy) stay on your credit report for seven to 10 years. It is very important to remember that any negative information on your credit report that is valid and accurate is impossible to remove before the seven to 10 year time period. Beware of any companies that promise you otherwise.

Written by admin · Filed Under Misc. 

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