Why Do Your Credit Report and Credit Score Matter?
Your credit is a priceless thing and nobody cares more about your credit than you. Face it, It determines what types of opportunities are available to you when you don’t have the cash on hand to make that important purchase. It can dictate what type of car you drive, the size of your house, and various other issues.
We've all heard of it. We all know we have one and have probably spent a fair amount of time thinking about it, but the fact of the matter is that most people have never seen theirs. So, what is it? Our credit report.
Oddly enough, even though our credit report influences just about every aspect of our financial life, most of us have never even seen ours, let alone know what our FICO score or credit score is. Not only will understanding your
credit report help you make important financial decisions, it can also help you see just what it is that is keeping you from getting the credit that you may need.
The FACT Act of 2003 is the name for The Fair and Accurate Credit Transactions Act. This act was developed in order to ensure that Americans were treated fairly when applying for credit. Under this act, citizens were also granted the right to one free credit report per year. It is something that we should all take advantage of.
What Is A Credit Report?
A credit report is a document that includes all your pertinent personal and financial information. It will contain your full legal name, your social security number, previous and current addresses, date of birth, and current and previous employers. This information has been obtained from any previous credit applications you have filled out.
This report will also include information about any financial accounts you have now or have had in the past. This will include any loans, credit cards and their credit limits, monthly bills, and so on. It will also include the names of any other persons that may be responsible for payment on these accounts.
Any financial situations that you have been involved in that are public record will also be included. This means that judgements, tax liens, bankruptcies, overdue child support, etc., will also show up on this report.
Inquiries are also marked on your credit report. Anytime you apply for a loan, credit card, or anything that requires an institution to request a copy of your credit report, it will be noted.
What Is My Credit Score and Why Is It Important?
Basically your credit score is based on a mathematical equation that evaluates all the information on your credit report. The end result is called your FICO Score. FICO stands for Fair, Isaac, and Company, the organization that developed the scoring mechanism.
This score is what will be used by companies to determine whether you are a safe financial risk or not. In order to even have a FICO score, you must have at least one open account on your credit report and that account needs to have been open for at least six months.
Credit scores generally range between 300 and 800. The average credit score lies somewhere between the 600 and 700 range. As a rule, in order to receive a standard, lower cost loan a score of 620 or above is required. A high score indicates a low credit risk, meaning those with high scores find it very easy to obtain credit.
Your credit score is influenced by your financial history. Outstanding debts past 30 days, consistent late payments on monthly bills, and any collection action that has been brought against you will determine what your score will be. Your credit score will influence not only the decision to give you the loan or credit card, but also the amount of interest to attach to the line of credit. The higher your credit score, the lower your interest rate and vice versa.
Knowing and understanding your credit report is vital to getting a mortgage, car loan, and even renting an apartment or getting a job. If you have never seen your credit report, check it out soon. There is a chance that yours may contain errors and it's critical that you get those errors cleaned up quickly.
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