Credit Report Basics
Your credit report contains details about your financial behavior and identification information.
Credit history or a credit report refer to this user-friendly report. Credit reporting agencies gather and organize data about your credit history from your creditors and public records. Your credit report is available to creditors, employers and others as permitted by law, which may speed up your credit application process. By obtaining a copy of your credit report, you will know what lenders see when they examine your credit history.
How Can I Get My Credit Report?
To obtain the free credit report that you are entitled to under federal law, click here. You can access your credit report from all three credit reporting agencies — Experian, Equifax, and TransUnion. Be sure to also look into daily monitoring of your credit report from each of the three credit reporting agencies. You can access your credit report online 24 hours a day with this service. Knowing that your credit records are monitored daily gives you peace of mind. Any abnormal account activity will be notified to you immediately.
How Often is My Credit Report Updated?
Creditors generally send information to credit reporting agencies once a month. Individual creditors send updates on different days of the month. As an example, reporting agencies might receive an update from creditor A on the first of every month, from creditor B on the 11th, etc. That’s why it’s vital to check your credit report every day.
How to understand your Credit Score
You can save thousands of dollars in mortgage interest, lower your auto insurance premiums, and it may even help you land your next job with a high credit score.
Credit Score Basics
What is a credit score?
Your credit score summarizes all of your credit report information into one number. It is calculated using a mathematical equation that evaluates the information on your credit report at that particular credit-reporting agency. By comparing this information with past credit report patterns, scoring determines your credit risk. Your credit score tells a lender how likely you are to repay a loan or make credit payments on time. You have a better chance of getting the credit you apply for if your score is high.
How is it used?
Credit scores are one of the main tools creditors, employers, insurance companies, and finance companies use to determine your creditworthiness. Credit decisions are often made based on your credit score, which is a quick snapshot of your financial situation. Creditors may also obtain your full credit report in order to gain further insight into your level of risk.
How is my credit score calculated?
A credit score summarizes the information in your credit report into a single number. The number is calculated by evaluating many types of information (score factors) from your credit report at this particular credit reporting agency. There are many score factors that can affect your score in a positive or negative way. Each factor is listed according to its degree of influence on your score, which means that the first factor listed is what most negatively affected your score. Examples of score factors include but are not limited to:
Too many inquiries (how often you apply for credit)
Too many serious delinquencies (how timely your account payments are)
Too many recently opened accounts (how often you have opened new lines of credit recently)
Average balance of revolving accounts is too high (what you owe vs. available)
Too few mortgage accounts (what types of credit do you use)
Many types of credit scores are used by credit reporting agencies to evaluate credit risk. Mortgage lenders may use one score type, while auto dealers and credit card issuers may use scores offered by the credit reporting agencies or that they have developed themselves.
Monitoring your credit score
Each time a creditor submits new information about you, your credit file is constantly changing. To improve or maintain your credit score, you need to be proactive and monitor it. Some positive steps you can take to improve your credit standing:
Learn what’s on your credit report, detailing your credit history from each of the national credit reporting agencies. By monitoring your credit file, you can better understand your credit score.
Make sure your credit report is accurate. Examine all three bureaus’ files, as the information may not be the same. Take steps to dispute any errors you find so that they are removed from your file.
Consider developing a plan now if you are having trouble paying your bills. Create a list of everyone you owe money to and how much you owe. Talk to your creditors about payment options. You should start now to catch up with late payments.
Consolidate your bills with a balance transfer to another credit card that has a lower interest rate, while eliminating three or four credit card accounts you currently have.
Find ways to reduce your spending and increase your income. Get a friend or family member to help you come up with a realistic budget that will help you catch up with late payments.
Last but not least, wait until you are financially able to use credit cards again before using them.
How to interpret each section of your Credit Report
Among other things, your credit report shows how you have used credit, such as the accounts you have (both opened and closed), your payment history, credit limits, and amounts owed.
Credit Report Guide
The easy-to-read visual road map to understanding your credit report identifies each section of the report and contains clear, concise definitions to assist you in understanding it. To view, click here.
How to turn credit jargon into plain English
Get the definitions of common terms and phrase used throughout the secure.freescoreconnect.com Credit Monitoring website, your credit reports and credit scores.
account – An account represents a relationship between a company (the account owner) and consumer, where the consumer purchases a product or service in such a way that represents the transfer of money over time.
account number – A reference number assigned to accounts, by the creditor or collection agency, to uniquely identify a consumer as the owner of that account.
account reviews – Inquiries made into a consumer’s credit history by creditors, with whom the consumer has a current relationship. These inquiries are not included in the business version of a consumer’s credit report.
adverse action – An unfavorable action, such as the denial of credit, insurance or employment, taken by a creditor or other entity, affecting a consumer. Under the Fair Credit Reporting Act, creditors must disclose the reasons for any adverse action.
adverse information – Information about a consumer that a creditor or other entity considers a risk or unacceptable, such as a past due account.
bank card or debit card – A credit card issued through a bank.
bankruptcy – A legal proceeding to give a person or business some relief from debts. See also Chapter 7 Bankruptcy, Chapter 11 Bankruptcy, Chapter 12 Bankruptcy, and Chapter 13 Bankruptcy.
business version (of a credit report) – An abbreviated version of a consumer credit report. The business version of a credit report is what creditors see and does not contain promotional inquiries or account reviews.
Chapter 7 Bankruptcy – The chapter of the Bankruptcy Code that provides for court-administered liquidation of the assets of a financially troubled individual or business.
Chapter 11 Bankruptcy – The chapter of the Bankruptcy Code that is usually used for the reorganization of a financially troubled business. Used as an alternative to liquidation under Chapter 7.
Chapter 12 Bankruptcy – The chapter of the Bankruptcy Code adopted to address financial difficulties of the nation’s farming community.
Chapter 13 Bankruptcy – The chapter of the Bankruptcy Code in which debtors repay debts according to a plan accepted by the debtor, the creditors, and the court.
charge card – A credit card that requires full payment of the bill each month; no interest is charged. The American Express Card and Diners Club Card are examples.
consumer version (of a credit report) – The consumer version of a credit report lists inquiries, such as promotional inquiries and account review. Only the consumer can request this version of their credit report. Creditors cannot see this version; they see only the business version of credit reports.
credit – A consumer’s ability to make purchases, obtain services, or borrow money based on his or her promise, ability, and demonstrated willingness to repay.
credit reporting agencies – A company that gathers information about how consumers use credit, which the credit reporting agency in turn provides to potential creditors, employers and others who have a legally-recognized reason (permissible purpose) to inquire about the creditworthiness of an individual.
credit card – A company that gathers information about how consumers use credit, which the credit bureau in turn provides to potential creditors, employers and others who have a legally-recognized reason (permissible purpose) to inquire about the creditworthiness of an individual.
credit risk – An assessment of a consumer’s likelihood of fulfilling the terms of a credit agreement.
credit score – A mathematical calculation that reflects a consumer’s creditworthiness. The score is an assessment of how likely a consumer is to pay his or her debts.
creditor – Person or business to whom a debt is owed.
creditworthiness – A description of a consumer’s credit behavior and management that leads to a creditor’s decision whether or not to make an offer of credit.
date closed – The date when a credit agreement or account was terminated.
date opened – The date when a credit account was established.
default – Failure of a consumer to make loan or credit repayments as agreed in a loan or credit agreement. See manner of payment.
dispute – To question the accuracy of information in a credit report.
Fair Credit Reporting Act (FCRA) – The FCRA protects consumer’s privacy by defining permissible purposes a business or individual must have when requesting a credit report; provides consumers with the right to obtain copies of their credit reports for free if denied credit; defines obsolete information; and declares that reasonable procedures must be used to ensure accuracy.
fraud – Intentional misuse of information of truth in order to induce another to part with something of value or to surrender a legal right.
Identity – The distinguishing character or personality of a consumer. Also includes any unique information about a consumer such as a Social Security number.
identity confirmation – The successful verification of a consumer’s identity.
inquiry – An examination of a consumer’s credit history.
installment loan – A credit account in which the debt is divided into amounts to be paid successively at specified intervals set by the terms of the loan.
installment loan account number – A reference number assigned by the creditor to a specific installment loan account (for example: auto, student, furniture, jewelry).
Lien – An interest that a creditor has in a consumer’s property that lasts until the satisfaction of some debt or duty.
line of credit – Credit limit established by a creditor.
Manner of Payment (MOP) – A series of codes or statements used to show the payment habits (prompt, delinquent, etc.) of a consumer.
mortgage – A document in which the owner pledges his/her/its title to real property to a creditor as security for a loan.
mortgage account number – An account number created by a creditor that is usually found on either the monthly statement or coupon book issued with the loan.
open account – An account that is active, still in use, or is closed, but still being paid.
paid as agreed – A designation on the credit report that indicates the consumer is repaying the credit account according to the terms of the credit agreement.
permissible purpose – The particular circumstances under which a consumer credit report may be disclosed by a credit reporting agency in accordance with the Fair Credit Reporting Act.
promotional inquiry – An inquiry made into a consumer’s credit report for purposes of a promotional offer.
public records – Information that is available to the general public, including tax liens, court judgments, and bankruptcy.
retail card – A credit card that is issued by a retail store.
revolving charge account – Credit automatically available up to a predetermined limit so long as a consumer makes regular payments.
Score – See credit score.
Secure Sockets Layer (SSL) – An Internet security standard that is used to establish a secure connection on the World Wide Web.
Skimmer – Skimmers are credit and debit card readers. When you give someone your card to pay, the card is run through an additional machine, which captures the information that appears on your credit card.
Tradeline – Any credit account such as a bank loan, credit card, or mortgage.
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