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Credit Bureau Reports and Your Credit Rating – Do You Understand Your Credit Score?
Do you know what credit rating is? After all, do you know what your credit score is? Most people don’t think they need to worry about it. They did so. Even if you never borrow money you should be worried. Let’s say you need to buy a new car, and like many of us, you can’t afford it. You will need a car loan. At some point in your life, you will probably want to buy a home. Maybe you’ll need a loan! The most important thing a lender considers is your credit history and credit score. This will affect the interest rate offered to you. You need to understand this important part of your financial life in order to manage it to work for you. If you ignore it, it will definitely work against you.
A credit rating is issued by an agency. A rating is a measure of how you have managed your finances. A credit report contains information about where you live, how you pay your debts, and whether you’ve ever been sued, foreclosed on, or filed for bankruptcy. Consumer reporting agencies nationwide sell the information on your report to lenders, insurers, employers, and other businesses that use it to evaluate your applications for credit, insurance, employment or renting a home.
There are three main offices. Each company determines your score based on a formula developed by the Fair Isaac Corporation. Each agency uses a slightly different name for their articles. Equifax calls their points “Beacon;” Experian calls their scores “FICO;” and Trans Union calls their articles “Empirica.” Because lenders don’t usually report account activity at all bureaus your score may vary.
The rating takes into account the activity related to revolving credit and installments that are not secured by hard assets. This includes your credit cards, term loans, business accounts, utilities, lines of credit, etc. Agencies may not use the same scoring system so even if all the information is exactly the same the scores may vary. The rating system provides you with a credit score between 300 and 900 and higher scores indicate lower credit risk. A score of 650 or higher is generally considered good credit by most lenders.
What Matters?
Payment History – Are payments made on time? – 35%
Accounts Payable – Is your account balance close to the limit? – 30%
Length of Credit History – How long have your accounts been open? 15%
Taking on multiple accounts – how many new accounts have been opened/? – 10%
Types of credit used – Mortgage, auto, checking account, revolving and installment loans 10%
What is not counted?

Your race, color, national origin, sex, age, marital status

Your salary, occupation, job title, work information or home address

The interest rate on your checking account

Anything like child support, rental agreements, participating in credit counseling
Is your credit score always accurate? No. It is estimated that nearly 80% of credit reports contain errors. So if you want to correct these errors you will need to get a copy of your statement. Fortunately, the Fair Credit Reporting Act requires that every consumer reporting agency nationwide (mentioned above) provide you with a free copy of your credit report, upon your request once every 12 months.
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