Whether you’re starting out in the professional world or you’re looking for a fresh start, it’s important to know about credit reports and credit scores and how much they affect everyday life for most people. Your credit score can affect the kind of house you can buy, the apartment you can rent, the job you get, the school you can attend and just about every other aspect of living in a modern world.
Is there a difference between a credit score and a credit report?
When experts talk about a credit “score” they are usually referring to the total calculated number that is gotten from a full credit report. A full credit report could be many pages long and will list lots of things like debt paid, open loans, open credit cards and so forth. A credit score is a single number that summarizes all those good things and bad things listed on your credit report. Your credit score is a system devised to give information to lenders about your credit history. Are you a risk to them if they lend you money?
FICO Credit Scores
With a credit score, a higher number is almost always better than a lower number. Different credit agencies use different ranges, but the most widely used score, the FICO, scores credit on a range from 300 to 850, with a majority of people having a credit score between 650 and 799. Here are the general credit score ratings and meanings:
- 700 – 800 Excellent Credit Rating
- 680 – 699 Great Credit Rating
- 620 – 679 Average/Good Credit Rating
- 580 – 619 Below Average Credit Rating
- 500 – 579 Not Good Credit Rating
- Below 500 Very Bad Credit Rating
Why do you need a good credit score?
Your credit score on a full credit report is used by loan and mortgage companies to determine if they should do business with you – this is why the accuracy of your report is important. You should know what it on these reports, check if the information is accurate and if it is not, follow the steps necessary to correct the information. Home and apartment rental companies also use this to determine if you are able to pay the monthly payments they require. Potential employers are now also using credit scores, though there has been some controversy over this.
How to see your credit report and credit score?
Get a copy of your credit report. You have a right to know what’s in your report and you can ask the company, but you have to ask for it. Under the FACT Act (Free File Disclosure Rule of the Fair and Accurate Credit Transactions Act), each of the nationwide consumer reporting companies — Equifax, Experian, and TransUnion — is required to provide you with a free copy of your credit report once every 12 months, if you ask for it.
Go to a trusted source for this information – here’s the trusted source and it’s free: www.annualcreditreport.com. You can also contact them at 1-877-322-8228, or complete the Annual Credit Report Request Form and mail it to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.
Make sure the information is correct.
According to the Federal Reserve, you can access a free credit report from any of the three national credit reporting companies every 12 months. In some states, they’re free all the time. Some consumer companies are allowed to charge a very small and reasonable fee to give you a copy of your report. Your rights as a consumer and to gain information about your credit rating are protected by the Fair Credit Reporting Act (FCRA).
Also Read: How To Improve Your Credit Score 2021
Remember, reviewing your credit report helps you determine what steps to take toward fixing your credit so that you can get a loan. Consider it a personal history lesson, study it and take the steps necessary to clean up your bad credit history.
Information you should access and review to protect your rights and to improve your credit history should include the booklet that the Federal Trade Commission (FTC), the nation’s consumer protection agency, has written to help you improve your credit report. If you do not have access to a computer go to your nearest public library and ask for help.
Companies may have a range of factors that they use to determine their credit score for you. Different credit scoring models are used by various companies, and all the companies keep their own scoring systems a secret. But there are common factors in all of them. If you have a bad credit history start taking these basic steps to improve your credit rating. With a good credit score, you will find that it’s easier to work with loan companies, you will get better rates on your outstanding loans and it may even help you get a better job!