What’s Behind a Credit Report?

We all hear about credit reports and how important they are to you. The better yours is, the more money you can save if you need a loan or any other type of credit. Even insurance companies are now taking a look at credit reports when deciding on your premiums for the year. Let’s face it, we are not considered people anymore, we are considered a number – and that number is our FICO score.

It’s important for you to know what’s on your credit report. Identity theft is on the rise, and you want to be sure you haven’t become a victim. Even simple things can show up, a store might have made an error, a bill maybe never made it to your new address, the reasons could be endless. Most Americans have no idea on what’s listed! You are entitled to a free report every year, from each of the three major reporting companies, which include Equifax, Experian and TransUnion.

What are scores and what do they mean? A score at its lowest starts at 300. If your number falls in between 300 and 549, chances are you’re not going to be able to get that loan you were hoping for. You are considered a very high credit risk. Sometimes, it can be as simple as not having any credit; it doesn’t mean that you haven’t paid your bills.

From 550 to 699, you are considered a medium risk. You might get the loan, but you will most likely have to pay a higher interest rate. From 700 to 850, you should have an incredibly smooth loan process and you’ll receive the best interest rates.

Several different things, including no history of debt, high debt compared to income and your payment history, can determine your score. What helps is if you pay your bills on time, only hold 2-3 credit cards and keep the balances below the limit. Paying more than the minimum due will also help. Establish a long term credit history if you can.

What will hurt you is if you have too many credit cards or none at all. High debt and delinquent accounts, bankruptcy and charge offs are some of the worst to have.

If you have bad credit, don’t despair. It won’t follow you around forever if you start on the right track today to get it straightened out. Do your best to pay your bills on time, and make sure you get your annual credit reports so you know what is on there. Know your score, and do your best to maintain and improve it. While I’m not advocating taking out loans, a fact of life is sometimes we need them!