Living Frugal
Your Credit Report
Your credit report is your lifetime of financial information compiled together to rate how you manage your finances. Do you pay your bills on time? How much credit do you have access to? Are you living up to the commitments you made to pay loans back?
The credit bureaus get the information from your utility company, landlord, lenders and merchants. After they gather all of your lifelong financial information, they sell it to businesses who can now analyze your credit history.
A creditor will make their decision based on the information in your report from the credit bureau.
Your credit report will consist of different types of information
- Personal - This would include your name and address (previous included), employers, contact information and of course last but not least, your social security number. (Read - Preventing Identity Theft)
- Credit History - This information consists of how well you have paid your bills. Were they paid on time? It will include data from banks, credit card companies, mortgage companies and even retailers if you have made purchases on credit (furniture, TV...etc)
- Credit Inquiries - This information will include creditors who have requested and received a copy of your report.
- Disputed Information - This will be any disputes you have made about your report. This could be comments regarding something on your credit that may be false or misstated by a previous creditor.
Don't confuse your credit report with your credit score. They are two totally different things. However, your credit score is based on the information in your report. The higher your number, the better credit you have and the better opportunity you have to finance at a good interest rate.
How credit scores are calculated
Your credit score is broken down by several factors:
- Payment History
- Amounts Owed
- Length of your Credit History
- New Credit
- Types of Credit Open
- 35% of your score is determined from your payment history. Things such as have you paid on time, have you paid at all?
- 30% of your score is determined from the amounts owed. If you owe an astronomical amount of money on credit cards, your credit score will be lower.
- 10% of your score is determined from the type of credit used.
- 10% of your score is based on new credit.
- 15% of your score is based on your credit history.
Given this breakdown you can see how all of your financial transactions impact your credit score.
What will Negatively Impact My Credit Score?
- Exceed the limit on a credit card.
- Paying a bill late.
- A credit card maxed out and only paying the minimum payment. As a general rule if you have more than 30% of your line of credit used up, it will negatively impact your credit score.
- Bankruptcy
- Charge off - this is what a lender puts on your report when they gave up on ever getting any money from you.
- A Tax Lien
- Foreclosure
- Debt Collections of any kind
To sum it up, your credit history in your report will impact you greatly when applying for any type of credit.
AnnualCreditReport.com is the authorized source for the free annual credit report that's yours by law. The Fair Credit Reporting Act guarantees you access to your report for free from each of the 3 bureaus every 12 months. If you want to pull your report more often, there is a fee.
It is important that you pull your credit report every year to make sure there are no discrepancies on it. Keeping an eye on your credit will also protect you against Identity Theft.
