Your Credit Report, Your Credit Score and Your Credit Future
This guide will help you understand what is included on your credit report so that you can understand what your score is comprised of and to help you move forward financially.
What is Included on Your Credit Report1) Personal Information Name, Date of Birth (DOB), Current & Past Addresses, Name of Current & Past Employers and Social Security Number (SSN) 2) Credit History Your credit reports contain the following information for each account that you've opened with a credit card company, bank, or other creditor in the last few years. o Date of account opening (and closing, if applicable) o Credit limit (or loan amount) o Monthly balance as of each statement date (contrary to what many people believe, credit reports do not list information about individual purchases or other transactions.) o Monthly payment history that indicates whether or not minimum payments were made on time (credit reports do not list your exact payment amount) 3) Credit Inquiries An inquiry is recorded whenever your credit report is "pulled" (i.e. viewed) by another party, such as a lender, credit card company, service provider, landlord, or insurer. Credit inquiries remain on your credit report for up to 2 years, and each can temporarily result in a slight dip in your overall credit standing. If you wish, you can opt out from allowing companies to look at your credit report without your permission. This will simply remove your name and contact information from the lists that credit bureaus sell banks so that they can send people pre-approved credit card offers. 4) Public Records There are three main types of public records that can be included in credit reports. Each has a detrimental impact on your credit standing and may remain for up to 10 years. o Bankruptcies: Chapter 7, 11, and 13 bankruptcies can be listed on your credit reports. The length of time they will remain there and the damage done to your credit standing depends on the type of bankruptcy in question and whether or not you adhere to the terms of the bankruptcy. o Tax Liens: Courts often attach a notice known as a lien to property records in order to block the sale of the property until unpaid debts (e.g. unpaid taxes) are addressed. o Civil Judgments: If a court finds that you owe another party money (e.g. child support), this will be reflected on your credit report. 5) Personal Statement General statement that applies to multiple entries in your credit history or to the history as a whole. General statements remain for two years. Not recommended because this general statement may remain on your report after the negative account is deleted. 6) Statements of Dispute Account specific, a statement of dispute presents your side of the story when you disagree with the reported status of an account. For instance if you dispute an account as "never late," but the lender says the information is correct, you can add a statement telling new lenders that you disagree with the status of the account and how it is being reported by the lender. Statements of dispute are helpful because they alert lenders to your disagreement and in some instances can give you an opportunity to provide documentation or other proof so that your application can move forward.
Credit Score- ALL THINGS FICOWhat is FICO? A FICO score is a credit score was first developed by FICO (Fair, Isaac, and Company), a company that specializes in what's known as "predictive analytics," which means they take information and analyze it to predict what's likely to happen. In the case of credit scores, FICO takes credit information and uses it to create scores that help lenders predict behavior, such as how likely someone is to pay their bills on time (or not), or whether they are able to handle a larger credit line. What the Categories Mean Payment history (35%) The first thing any lender wants to know is whether you've paid past credit accounts on time. This is one of the most important factors in a FICO(R) Score. Amounts owed (30%) Having credit accounts and owing money on them does not necessarily mean you are a high-risk borrower with a low FICO(R) Score. Length of credit history (15%) In general, a longer credit history will increase your FICO(R) Scores. However, even people who haven't been using credit long may have high FICO Scores, depending on how the rest of the credit report looks. Your FICO Scores take into account: o how long your credit accounts have been established, including the age of your oldest account, the age of your newest account and an average age of all your accounts o how long specific credit accounts have been established o how long it has been since you used certain accounts Credit mix in use (10%) FICO Scores will consider your mix of credit cards, retail accounts, installment loans, finance company accounts and mortgage loans. New credit (10%) Research shows that opening several credit accounts in a short period of time represents a greater risk - especially for people who don't have a long credit history.
Nurture Your Credit and Watch Your Score Grow!Pay Down Debt This category contributes 30% to a FICO Score's calculation and can be easier to clean up than payment history, but that requires financial discipline and understanding the tips below. o Keep balances low on credit cards and other "revolving credit". High outstanding debt can affect a credit score. o Pay off debt rather than moving it around. The most effective way to improve your credit scores in this area is by paying down your revolving (credit cards) debt. In fact, owing the same amount but having fewer open accounts may lower your scores. o Don't close unused credit cards as a short-term strategy to raise your scores. o Don't open a number of new credit cards that you don't need, just to increase your available credit. This approach could backfire and actually lower your credit scores. Pay Bills on Time and Resolve Disputes and Collections "If you think nobody cares if you're alive, try missing a couple of car payments." -Earl Wilson Contributing 35% to a FICO Score calculation, this category has the greatest effect on improving your scores, but past problems like missed or late payments are not easily fixed. o Pay your bills on time. Delinquent payments, even if only a few days late, and collections can have a major negative impact on your FICO Scores. o If you have missed payments, get current and stay current. The longer you pay your bills on time after being late, the more your FICO Scores should increase. Older credit problems count for less, so poor credit performance won't haunt you forever. The impact of past credit problems on your FICO Scores fades as time passes and as recent good payment patterns show up on your credit report. And good FICO Scores weigh any credit problems against the positive information that says you're managing your credit well. o Be aware that paying off a collection account will not remove it from your credit report. It will stay on your report for seven years. o If you are having trouble making ends meet, contact your creditors. This won't rebuild your credit score immediately, but if you can begin to manage your credit and pay on time, your score should increase over time. TIME Patience isn't a factor that's used to calculate your credit score, but it's something you need to have while you're repairing your credit. Your credit wasn't damaged overnight, so don't expect it to improve in that amount of time. Continue paying your debts on time each month and over time you will see your credit score improve.