The Importance of Your Credit Score and How to Obtain
Free Credit Reports
It has always been amazing to me that so few people understand something that
is as financially vital to them as their credit report. Many people have
absolutely no idea of what is and isn't on their credit reports and are literally
clueless about their credit score or how to obtain a copy of their credit report
should they need to. These have always been important issues especially
after the subprime loan crisis now, but the credit
reporting industry has traditionally been less than forthcoming with consumers
about how to obtain this information. Thankfully that has changed in today's
identity theft and fraud ridden world, but surprising numbers of people still
don't know the first thing about their own credit report and credit score.
Understanding your credit score
You may have heard the term "credit score" in the past but not had the
first idea what it meant. Maybe you do know what a credit score is, but - like
most people - have no idea what yours is. Or, maybe you know what your credit
score is and have a general idea what credit scores are, but have no clue what
your particular score means to you and, more importantly, what it means to a lender.
A credit score is a numerical value (usually between 500 and 900) that is assigned
to a consumer's credit profile when it is reviewed. This is also sometimes referred
to as a FICO (the system was developed by Fair Isaac & Company) score. The system
used to create the credit score takes all kinds of information into account. Primarily
the score is based upon your past & current credit history. Obviously paying your
obligations to the agreed terms will have a positive effect on your score. Not
paying your obligations will have a negative effect on your score - but this is not
the only thing that can adversely affect the credit score. A high debt to income
ratio (DIR) will lower your score - even if you pay all your bills on time and as
agreed. A high number of credit inquiries can lower your score, as can a general
lack of credit accounts. You may have heard that "no credit is just as bad as bad
credit?" This is not necessarily true, but the saying is referring to the credit
If your credit score is below 600 it is generally considered to be "bad".
A score above 750 is generally considered "good". Higher and lower numbers
obviously alter the consideration.
Obtaining free credit reports
There are several companies that advertise the ability to provide you with a free
copy of your credit report. Avoid these as most of them are really trying to sell
you something and your receipt of the "free" credit report often hinges
on your agreement to purchase their services. Instead, you can obtain a free copy
of your report from any or all of the three major credit reporting agencies. These
In most states you are entitled to a free copy of your credit report each year and in recent years the agencies have implemented
explanatory information that helps you understand the information on the report.
You are also entitled to a free copy of your report when you are denied credit for
some reason. The lender will notify you in writing of the name and contact information
of the agency which provided the information on which they based their decision. That
agency will provide you with a free copy of your credit report if you ask for it.
In short, credit score is the primary factor that lenders will consider when approving or declining
your loan application and the interest rates you pay. Especially, after
the subprime loan crisis, the lenders are very cautious on every home
loan application now. Thus, repairing your credit profile is one of the most
important financial decisions you can make. If you have bad credit and would like to increase your credit score, you
can engage a trusted firm to
repair your credit report today!