What's a credit report?

What's a credit score?

Credit Reporting Agencies

How to repair your credit

When applying for a debt consolidation credit card or any other loan product, one of the first things a bank or lender will ask is: how is your credit? It is important to know and understand why your credit profile is so important. If your response is I have less than perfect credit, there are still options available to you. The information in your credit report helps lenders decide how much credit or what size loan to give and what interest rate to offer. The better your credit score, the better chances are that you will qualify for the best credit card rate and terms.

The very first step in repairing your credit is to obtain a credit report directly from one of the three credit reporting agencies. This credit report will include your credit scores and any negative history. Since you are pulling your report directly from the reporting agencies, your credit score will not be hurt. Try not to have your credit pulled mulitple times from various companies especially before you apply for a loan or debt consolidation. The three credit reporting agencies are: Equifax, Experian, and Transunion. The credit scores contained within the credit report is used to determine your credit score and overall risk to the lender or bank. Bad credit is generally speaking any credit score less than 620.

What's a credit report?

A consumer credit report is a document that contains a facts and records of an individual's credit payment history. Credit Card lenders and banks are permitted by law to review your credit report objectively to determine whether to give you an approval. As people pay their bills, most lenders report credit payment information to credit bureaus. Bad credit results from any reported late payments, and any other derogatory reporting such a judgedements, liens, bankruptcies, and foreclosures. Most of the information in your consumer credit report comes directly from the companies you do business with. Each lender has their own underwriting guidelines that they follow. In general, most debt consolidation credit card approvals are based heavily on your credit risk score.

What is a credit risk score?

Generally, a credit score measures the likelihood you'll repay what you owe, and it is based on information in your credit report. A credit score is a statistical summary of the information contained in a consumer's credit report. The most well known type of credit risk score is the Fair, Isaac or fico score. A sophisticated math processes calculate the score by assigning numerical values to various pieces of information in the credit report. Credit bureaus provide risk scores to lenders to objectively evaluate an applicant's credit worthiness. The three main credit bureaus that track and report credit include: Experian, Equifax, and Transunion. The score itself is relative and is viewed differently by various mortgage lenders and banks depending on numerous factors, including the creditor's risk levels, the lenders strategic goals, and mortgage underwriting guidelines. Your risk score will change over time as your credit history develops. Scores range from 375- 850. The higher the score the better the credit rating.

Credit Reporting Agencies

Equifax Information Services
P.O. Box 740241
Atlanta, GA 30374-0241
800-378-2732
http://www.Equifax.com

Experian
955 American Lane
Schaumburg, IL 60173
847 517 5600
888-EXPERIAN
http://www.Experian.com

Trans Union Corporation
P.O. Box 390
Springfield, PA 19064-0390
800-916-8800
http://www.Transunion.com

How to improve your credit

Correct blatant mistakes.
Your credit score is only as good as what shows in your credit report. Review your reports from all three credit bureaus for accuracy at least once a year and always a few months before applying for a loan. It is best to order this report directly through the credit reporting agencies. Equifax.com for example can provide you with a tri-merge credit report. If errors appear on your report generally you must obtain and submit to all three agencies a signed letter from the paricular creditor stating that this item is being reported in error and should be deleted.

Pay your bills on time.
This is always a good practice, and it's especially critical that you make prompt payments close to the time you need a loan. That's because a late or missed payment in the last few months are more likely to lower your score moreso than an isolated late payment five years ago.

Reduce your credit card or revolving debt balances.
A heavily weighted factor in your fico score is how much money you owe on your credit cards relative to your total credit limit. As a general rule it is good to keep your balances at or below 30 percent of your credit limit.