Understanding Your Credit Report and Credit Score

Do you know what your credit report looks like, what it contains, and what your credit score is?  If you are like the average American chances are you answered no to all three questions.  And when it comes to your credit score and credit report – ignorance is far from bliss.  Your credit report and credit score are a measure of your past, present, and future financial health.  This measure is used by lenders when determining risk when you apply for credit card, loan, or other items related to finance. 

The Difference Between Your Credit Report and Credit Score

There is a vast difference between your credit report and credit score.  These terms are often used interchangeably, however this is done in error.

 Your Credit Report

Do you know what your credit report is saying about you?  A credit report is a financial record of past and present payments and debt, including late payments, and non-payment of debt.  Also, it contains key personal information - your name, social security, places of residence (both past and present), bank accounts, credit cards, loans, payment records, your credit score, and other vital statistics.  Late payments and non-payments are recorded here and are reflected in your credit score.

 Your Credit Score

Credit scores can range between 300 and 850 with the national average between 650 and 750, and the higher your credit score the better your credit is.  Your credit score indicates a risk level to potential lenders, and the probability a loan or other debt will be repaid if it is given.  A high credit score indicates you are financially responsible, and according to statistics indicate you will repay a debt.  However, if you check your credit and discover you have a low credit score there are ways to repair it.

Why is this Information Valuable?

There are two reasons you should be well informed of what your credit score is and what your credit report contains.  The first is to repair your credit, which will influence your credit score.  The process can be time consuming, and will involve repaying past debt – but will be worth it when you have an increased credit score.  Second, it can inform you if you are a victim of identity theft.  By catching identity theft early, you can repair the damage before it becomes extensive.

How Much Does it Cost to Check Your Credit Report and Credit Score?

You can obtain this information annually for free by completing the Annual Credit Report Request form.  More information can be found via the FTC (Federal Trade Commission) website. Be careful when you enter web addresses for the FTC or other reporting agencies.  Scam artists on the web own similar addresses – if they charge a fee to access your report they are a scam.  Also, you should check your credit several months out of the year – but verifying your report and score once a year is better than not at all.

 Who are the Primary Agencies that Report Your Credit Report and Score?

Lenders use three primary programs to verify credit reports and credit scores.  The reporting agencies are Equifax, TransUnion, and Experian.  In addition to the FTC, you can obtain a free copy of your credit report and score.

 If you have any questions, visit the FTC (Federal Trade Commission) website.  They have a number of videos and resources available to consumers, and are an invaluable resource when learning about credit and protecting your rights as a consumer.