What Is A Credit Report and Why Does It
Matter
We've all heard
of it. We all know we have one and have probably spent a fair amount of time
thinking about it, but the fact of the matter is that most people have never
seen theirs. So, what is it? Our credit report. Oddly enough, even though
our credit report influences just about every aspect of our financial life,
most of us have never even seen ours, let alone know what our FICO or credit
score is. Not only will understanding your credit report help you make important
financial decisions, it can also help you see just what it is that is keeping
you from getting the credit that you may need.
What Is A Credit Report?
A credit report is a document that includes all your pertinent personal and
financial information. It will contain your full legal name, your social
security number, previous and current addresses, date of birth, and current
and previous employers. This information has been obtained from any previous
credit applications you have filled out.
This report will also include information about any financial accounts you
have now or have had in the past. This will include any loans, credit cards
and their credit limits, monthly bills, and so on. It will also include the
names of any other persons that may be responsible for payment on these
accounts.
Any financial situations that you have been involved in that are public record
will also be included. This means that judgements, tax liens, bankruptcies,
overdue child support, etc., will also show up on this report.
Inquiries are also marked on your credit report. Anytime you apply for a
loan, credit card, or anything that requires an institution to request a
copy of your credit report, it will be noted.
What Is My Credit Score and Why Is It Important?
Basically your credit score is based on a mathematical equation that evaluates
all the information on your credit report. The end result is called your
FICO Score. FICO stands for Fair, Isaac, and Company, the organization that
developed the scoring mechanism. This score is what will be used by companies
to determine whether you are a safe financial risk or not. In order to even
have a FICO score, you must have at least one open account on your credit
report and that account needs to have been open for at least six months.
Your score is influenced by your financial history. Outstanding debts past
30 days, consistent late payments on monthly bills, and any collection action
that has been brought against you will determine what your score will be.
Your credit score will influence not only the decision to give you the loan
or credit card, but also the amount of interest to attach to the line of
credit. The higher your credit score, the lower your interest rate and vice
versa.
Knowing and understanding your credit report is vital to getting a mortgage,
car loan, and even renting an apartment or getting a job. If you have never
seen your credit report, check it out soon. There is a chance that yours
may contain errors and it's critical that you get those errors cleaned up
quickly.
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