Credit Report – A Basic Guide for Consumers

A credit report is a specially-designed statement that includes specific information about past and current credit activity which has a direct impact on an individual’s capability to receive loans, financing, and other types of monetary assistance.

Check Credit Report

Credit reports are created by companies, bureaus, and/or consumer-based reporting agencies that specialize in collecting and storing financial-based information about you.

The information is derived from various sources.

These include – but, are not at all limited to – credit card companies, mortgage companies, automobile loan agencies, lenders, and other types of financial-based entities.

Not all creditors are required to report financial information about you to each credit reporting business/company currently in existence.

Remember that credit is money….”Benjamin Franklin

What’s the Purpose of a Credit Report

The basic purpose of a credit report is to help various types of financial lenders make a determination about whether or not they should extend you credit or provide a loan to you, and at what type of interest rate and term.

Then, there are other purposes that the credit report serves.

For example, property owners may use the information in the report to determine if you are an ideal candidate for tenancy, businesses may use the data to determine if they should offer you insurance coverage, and utility companies may use the information to determine if you need a deposit and for how much.

Employers often use these reports to determine if employment should be offered.

What is a Credit Score?

A credit score is a specific number that is developed by a specific electronic-based model that includes all of the information within your credit report.

This model has the ability to determine if you are likely to repay your debts, how much you owe, how much credit utilization you engage in, how long you have been paying creditors, and how many inquiries have been made on you.

Inquiries occur when you attempt to sign up for certain types of loans and/or credit. This is when a company checks your credit report to learn more about you and the potential risks associated with doing business with you.

A credit score is a number that is 3-digits long. In most instances, these numbers range from as low as “300” to as much as “850”.

Credit Report - Before and After

Tips to Improving Your Credit Score

If you want to have a positive credit score on your credit report, there are many steps that you may take. These include the following:

  1. First, ensure that all of your bills are always paid on time. Not only does this improve your score, it helps you improve your chances for having direct access to various sources of credit in the future.
  2. Avoid using all of your credit cards to their max limit. This could drastically lower your credit score. Instead, use a little, pay it down, use a little more, pay it down, ensuring accounts are kept open so that your score continues to build.
  3. If you experience difficulties in paying your bills, attempt to negotiate the terms of what you owe. You may obtain counseling on this endeavor to make it easier.
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