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Experiences and advice on personal finance issues. From credit cards over credit scores to mortgages and real estate investing.
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What is a Credit Report and a Credit Score?
Question: What is a Credit Report?
Answer: Your credit report is a record of your loans, credit cards, payments and existing credit. The information is delivered by the firms and organizations that gave you credit or loaned you money (lenders).
Lenders regularly report information about your credit accounts to the so called credit reporting bureaus. The credit reporting bureaus collect this type of information and make it available to lenders and other decision makers upon request (for a fee).
When you apply for a credit card or loan, your credit information will be used to determine how much of a risk you are. Landlords will use your credit information to find out if you have paid your bills in the past or if they better look for the next tenant.
Your credit report contains:
- Current and past payment information—whether your payments have been on time or late.
- Outstanding balances—the balances on your credit cards and the amounts of your outstanding loans.
- Information about you from public records, such as a bankruptcy or overdue property taxes.
- Overdue child support payments.
- The names of everyone who recently asked for a copy (inquiries).
Your credit report does not contain:
- Information about your race, religion, political party, medical history, lifestyle, background or criminal record.
What is a Credit Score?
While each person's credit report is unique, the total report is summed up to a score. Positives on your report increase the number, negatives lower it. The three major credit reporting bureaus have slightly different methods of calculating the score, so if your score is 630 with one the others might rate you 650 or 640. People making decisions based upon your credit score typically use the score as an idea to put you in a certain category of customer/ applicant.
Checking on your report
The three major credit reporting bureaus try to keep your data correct but mistakes do happen. Therefore it is a good idea to review your credit information at least once annually, to make sure that all information is correct.
Accounts that you have paid off remain on your credit report even after you have finished paying them. If you handled the account well, it remains on your credit report for 10 years after it is paid off or closed. Negatives e.g. late payments and abandoned accounts, remain on your report for up to 7 years. A bankruptcy may stay on your report even for up to 10 years.
Because of a law passed in 2004, you can get a free copy of your credit report once per year from each of the three major credit reporting bureaus. Here is their contact information:
P.O. Box 9556
Allen, TX 75013
Atlanta, GA 30348
Consumer Disclosure Center
P.O. Box 1000
Chester, PA 19022
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