Your Credit Report

What is a Credit Report?

A credit report along with a credit score shows your creditworthiness – the likelihood that you will pay back your debt. Your credit report is what every financial institution or credit card company looks at when you are applying for a loan. Banks and credit card companies are all evaluating the potential risk posed by lending money to you. Your report shows any loans or credit cards you had in the past and currently have. Your report shows your balances and the payments you make. If you miss a payment or you are late on a payment that shows up as well hurting your credit report, credit score and your overall creditworthiness. The better your report is, the better conditions the bank will offer you.

Who are the major Credit Agencies?

There are three major credit reporting agencies today in the United States; Experian, Equifax and TransUnion. No matter what financial institution you go to for a car loan or mortgage loan they are more likely to use two if not all the reports and scores from these credit reporting agencies.

What is My Credit/FICO Score?

Everyone who has a credit history also has a credit or FICO score. FICO score is the most well-known and most widely used credit score model in the United States. All three credit agencies use the FICO model to produce a FICO score. To get lower interest rates you need a higher credit score. The higher your score the less risk you pose to the lenders. Pretty easy, right?

Can I get my Credit Report for Free?

Yes you can and as a matter of fact you should look at your credit report to make sure there are no discrepancies. Go to annualcreditreport.com and get your credit history for FREE once a year. All too often people become victims of identity theft which they are unaware of until applying for a loan. Do not be one of them! Get your free report today and look through it carefully. If you see anything on your report that does not belong to you or does not reflect your activities you can dispute them at the credit reporting agencies.

Criticism

Although the credit reporting system seems like a good way to determine someones creditworthiness, it is not without flaws. If you ever received your credit score from all major credit agencies at once you could have seen a slight difference in your credit scores. You would think that all players are consistent when evaluating your score, however unfortunately that is not the case. The reason behind the different scores is that all agencies use a different computation. The FICO sore has many variations of the calculation. There are also different scores for different loan types. What this really means is that when you order or receive your free annual credit report along with your score you see something entirely different than the financial institutions. Even when ordered from the same credit reporting agency. Doesn’t seem fair, right? Well, at least the Consumer Financial Protection Bureau have noticed this problem and will hopefully help correct it.