Understanding Your Credit Report

When it comes to credit, there’s one number that matters more than any other: your credit score. Your credit score plays an important role in your ability to obtain credit, as well as  in the interest rates you pay for credit cards, car loans or mortgages. Many people don’t realize their credit score can also influence whether they can rent an apartment, get insurance or even get a job.  Scores generally range from 300 to 900. The higher the score is, the less of a risk you are to a lender.

A high credit score translates into lower borrowing costs – helping you keep more of your hard-earned money. The lower the credit score, the more it will cost you to take out any type of loan.

The FTC provides a step-by-step guide to building a better credit report.

How can I get my credit report and credit score?

Under federal law, the three nationwide credit reporting agencies (Experian, Equifax and TransUnion) are required to provide you with a free copy of your credit report once every 12 months, upon request. The Federal Trade Commission (FTC) provides information on accessing your free credit reports.

You may also request your free credit report at annualcreditreport.com or by calling (877) 322-8228. A credit report, however, is not the same as your credit score. To see your actual score, you will be required to pay a fee to the agency whose calculation of your credit score you wish to see. Knowing your score gives you a good idea of how your creditors rank you relative to other consumers.

How is my score determined?

Generally, the credit reporting agencies determine your score by looking at five major categories: payment history, amount owed, length of credit history, new credit accounts and types of credit available. The FTC provides information about credit scoring and discusses how credit scoring systems are developed.

How can I improve my credit score?

The Federal Reserve provides 5 Tips for Improving Your Credit Score. Although FICO, (which stands for Fair Isaac Corporation, which is the private company that developed the methodology for calculating credits scores) does not release its scoring formula to the public, the company says approximately two-thirds of your score is based on two factors: whether or not you pay your bills on time, and the amount of your total credit limit that you are using.

Why is there a difference among my scores at the three credit reporting agencies?

Even though FICO has developed the scores for the three major credit reporting agencies (Experian, Equifax, TransUnion), all of your credit information is not necessarily reported to all three credit bureaus. Generally the scores should be close – if your score at one bureau is very different than the others, contact that agency to determine why there is such a difference.

What are the differences credit score names?

Each of the three credit major reporting agencies has its own score that has been developed using FICO’s methods. These are as follows:

• Equifax’s score: BEACON Score
• Experian’s score: Experian/Fair Isaac Risk Model
• TransUnion’s score: EMPIRICA

 

 

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