Your credit history is considered to be of high importance to many different professionals and organizations. These include banks, companies that specialize in lending money for mortgages, companies that offer utility services, vehicle loan companies, landlords, prospective employers, and more. As a result, it is imperative that you gain a solid understanding of your credit report, your individual credit score, and how various organizations and companies utilize the information of both. In this guide, you will be provided with the answers to the most important questions regarding your credit.
What is a Credit Report?
A credit report is a special record that outlines your credit history. It contains information about the following:
- Identity – The identifying information that is located on a credit report includes your name, the address that you use, your Social Security number, when you were born, and may also include information pertaining to your employment.
- Current Credit – If you have any current credit – such as credit card accounts, a loan for a vehicle, a mortgage, or a student loan – this information will be listed on your credit report. In most instances, your payment history, balances, and the terms of your existing credit will be outlined on the report.
- Public Records – If you have any public records, they will be outlined on your credit report. Examples include tax liens, court judgments, and/or bankruptcy records.
- Credit Inquiries – In addition to the above-listed information, information listed on your credit report includes any and all companies that have requested a copy of your credit report.
What is a Credit Score?
A credit score is a number consisting of three digits that represent the overall likelihood that you will pay what you owe and you will pay it on time. The number typically ranges from as low as 300 to as high as 850. The higher the credit score, the better. It is used to also determine your credit risk.
How is a Credit Score Determined?
A credit score is calculated by using all of the information contained within the credit report. This includes the amount of debt that you have, your payment history, and the length of time associated with your credit history. If you have a high credit score, it indicates that you have exhibited responsible credit behavior. In turn, this is likely to result in higher levels of confidence among lenders and other types of creditors when requesting credit.
What are the Ranges for Credit Scores?
The following outlines credit score ranges and what each mean:
300-579 – This is considered to be “Poor”
580-669 – These scores are considered “Fair”
670-739 – Scores in this range are considered to be “Good”
740 – 799 – This range is considered to be “Very Good”
800-850 – These scores mean you have “Excellent” credit
Why Are Credit Reports Important?
Credit reports hold a high level of importance because of the fact that they are used by various types of lenders and – in some instances – employers to assess how well you manage financial-based responsibilities. The following outlines a few examples of how your credit report may be used:
- Employers may evaluate your credit report to determine how responsible you are and if you are the right candidate for the position that they have available.
- Lenders will use the information in your credit report to determine if they are comfortable in providing you with a loan and will use the information to determine the terms of that loan.
- Landlords and property managers may use the information contained in your credit report to determine if you are a good tenant candidate for the home, apartment, or other type of real estate that they have available.
Who Actually Reports Credit-Based Information?
To date, there are three major reporting credit bureaus within the United States. These are TransUnion, Experian, and Equifax. These companies hold the responsibility of gathering information about you and placing it within your credit report. Then, once a person, business, lender, or other entity requests your credit, they are responsible in providing the information through the means of a credit report.
Can I Get a Copy of My Credit Report?
Yes, you can obtain a copy of your credit report once a year – completely free of charge. You may call 877-322-8228 for an instant request. If you desire, you may visit the following website instead of calling: annualcreditreport.com.
What Will I Need for My Free Credit Report?
To obtain a copy of your free credit report, you will need the following information:
- Your Name
- Date of Birth
- Social Security Number
When Can I Request My Free Credit Report?
You are entitled to one free credit report a year from each of the three major credit bureaus. You may order at any time, but no more than once a year per agency. For example, you may order all three credit reports in the Month of December, or you may choose to order one in January, one in July, and one in December (a max of only one per bureau each year) – the choice is yours!
What Should I Do with My Free Credit Report?
Once you receive your free credit report, you should carefully review it. Be on the lookout for errors, changes, and signs of suspicious activity. If you discover errors, dispute the information and make a request that the information either be deleted or corrected. You will have to contact either the credit bureau or the company or other entity that provided the information. If you wish, you may contact both.
Who is Allowed to See the Information on my Credit Report?
Your credit report does contain personal information that is highly sensitive; however, it is allowed to be shared with the following:
- Utility Companies
- Telephone Companies
- Cell Phone Companies
- Prospective Employers
- Insurance Companies
- Government Agencies
Note: If a court order or a subpoena for a Federal Grand Jury is issued and a credit report is required, the major credit bureaus will furnish these reports. If you submit a written request, they may also be provided to third parties.
Do The Credit Bureaus Decide to Grant Credit to Someone?
No, credit decisions are not made by the major credit bureaus. They simply provide the reports to the lenders and other entities that make inquiries. Those lenders and entities are the ones that make the decision on whether or not to grant credit to someone.
How Long Does Negative Information Remain on My Credit Report?
In nearly all instances, negative information remains on the credit report for a minimum of 7 years. If you file bankruptcy, it remains on your report for 10 years. Lawsuits and unpaid judgments remain until the statute of limitation runs out or for 7 years – whichever is considered to be “longer”. Any information that pertains to criminal-based convictions may remain on the report for an indefinite amount of time.
How Can I Find Out What My Credit Score is?
If you apply for credit, the entity that obtained your score may be able to share your score with you. You may contact the credit bureaus to obtain your credit score, too. For Equifax, you may call 1-800-685-1111. To call Experian, call 1-888-397-3742. If you need to contact TransUnion, you may also call 1-800-493-2392.
How Can I Improve My Credit Score?
There are many steps that you may take in order to improve your credit score. The following highlights the most productive strategies:
- First, always make certain that your bills and your debts are paid on time. If you have difficulty remembering, consider using automatic bill pay services through your bank.
- Create and stick to your budget.
- Try to avoid having credit and loan balances at limits. Pay down your debt as quickly as possible. You could pay your lowest balance first and move on to the next. You may also choose to pay down debt starting with those that have the highest interest rate. Either way will reflect positively on your credit score.
- Only use credit if it is absolutely necessary. If possible, always use cash for your purchases. Yes, it is good to have some credit. In order to keep an account open, spend on it periodically and pay it off as quickly as possible.
- Monitor your credit report throughout the year. If you see any errors, fix them immediately. Errors and inaccurate information on a credit report can really have a negative impact on your credit score.
Contact Us Today
If you are in need of financial advice or would like to learn more about credit reports and credit scores, contact one of our financial specialists today here at Somerville Bank. We can explain how to improve your credit score and have a wide range of credit services that may be beneficial to you. Simply visit or call one of our many locations today by clicking on the following link: https://somervillebank.net/locations/