Your credit reports and credit scores combine to reflect your credit. Your credit scores are a kind of grade that reflect how well you manage debt and credit. Comparatively, your credit reports provide all of the commentary and underlying information that go into determining this important grade.

Many people fixate on the concept of credit score. There is more than one type of credit score, so determining your number is a complex task. Different formulas are used by different credit score providers. Use this guide to credit scores to familiarize yourself with the basics.

In this guide to credit scores:
What Is A Credit Score?
What Is A Credit History?
How Do I Check My Credit History?
What Can Negatively Affect My Credit History?
How Do I Clear Up My Credit History?
How Do I Build A Good Credit History?
How Do I Improve My Credit Score?
Are There Different Kinds Of Credit Scores?
FICO-Brand Credit Score vs. Other Credit Scores
How Do I Monitor And Improve My Credit Score?
Conclusion

  1. What Is A Credit Score?

    By definition, credit scores are numerical summaries of information contained in your credit reports. Credit scores may range from as low as 300 and as high as 850. Higher credit scores are always better. Your credit scores are calculated from data contained in your credit reports.

    Negative information on your credit reports lowers your credit scores. The six worst types of credit report entries include judgments, charge-offs, tax liens, bankruptcy, and foreclosure. Lenders and others extending credit to you use credit scores to make an informed and fast decision about approving your request for credit or offering you a competitive low interest rate. Your credit score can affect how much you pay for auto insurance, your eligibility for a mortgage, and even you ability to get a phone contract or connect your hone to electrical power.

  2. What Is A Credit History?

    Each person's credit history, also known as a credit report, is a master record of all credit accounts you have held in the past. Details about these accounts, such as the account type, your payment responsibility (as an sole or joint borrower), credit limit, total loan amount, current balance, minimum payment amount, payment history over the previous seven-year period, and current account status are included.

    Your credit file also includes the lenders or businesses who have recently made an inquiries about your credit. If you recently applied for credit, the prospective lender wants to know how well you manage debt and credit. Credit inquiries may also occur when a business wants to make services or products to you.

    By law, your credit profile must not include information about your income, receipt of public assistance, or gender.

  3. How Do I Check My Credit History?


    Your credit report is a compilation of credit history. Companies who maintain consumer credit reports are known as credit bureaus or credit reporting agencies (CRAs). Experian, Equifax, and TransUnion are the three primary CRAs in the United States.

    Checking your credit history maintained by each CRA is your legal right. You may access a free credit report from each CRA by requesting them at AnnualCreditReport.com. In certain other situations, such as unemployment and planning a job search, you may request an additional free credit report. Several states allow residents to obtain a free additional credit report (or two free credit reports in total), including:

    • Colorado. Residents may request a free credit report per year, additional requests cost $8.00
    • Maine. Residents may request a free credit report every 12 months, additional requests cost $5.00
    • Maryland. Residents may request a free credit report every 12 months, additional requests cost $5.00
    • Massachusetts. Residents may request a free credit report during the calendar year, additional requests cost $8.00
    • New Jersey. Residents may request a free credit report every 12 months, additional requests cost $8.00
    • Vermont. Residents may request a free credit report every 12 months, additional requests cost $7.50

    Residents of Georgia and Puerto Rico may request unlimited free credit reports at any time. If you've already accessed free annual credit reports, it is possible to purchase individual or three-in-one credit reports containing credit information from all three CRAs.

  4. What Can Negatively Affect My Credit History?

    Small things mean a lot on your credit reports. For instance, falling behind in credit card minimum payments at 30 days or more will be reported on your credit file. Lenders that review your credit carefully consider negative items and may decline your application for credit when you need a loan, credit card, or other credit based service.

    Most negative credit information remains on your file for seven or more. Bankruptcy remains on your credit reports for at least 10 years. Although bankruptcy or foreclosure drop from your credit reports after these time limits, public reports at the local court house are kept for an indefinite period.

  5. How Do I Clear Up My Credit History?

    You have a legal right to accurate, error-free credit reports. When these files contain errors, it is your responsibility to have these errors removed. Write to the CRA reporting an error, or direct a dispute to the business or lender reporting the error to Experian, Equifax, or TransUnion. In either scenario, the credit bureau must investigate the dispute and remove the information if it finds in your favor.

    Documentation to refute the report error should be included with a letter of dispute. Send copies of these documents to support the investigation process. A copy of your cancelled check that shows you paid a credit card company on time supports your claim that a late payment reported by the issuer is in error.

  6. How Do I Build A Good Credit History?

    If you just graduated from high school and don't have credit accounts, you're less likely to have credit history profiles at Experian, Equifax, and TransUnion.

    Although you are legally allowed to request a credit card or apply for a loan at 18 years, you should probably wait until you've obtained a steady job with reliable income. Credit card issuers ask your income before approving a credit card because income helps you repay the charges you make with the credit card.

    Building a new credit history can be difficult. Few creditors will approve a credit card to an individual without a credit history. Fortunately, student credit cards or secured credit cards can help you build a good credit history and credit scores. Once you're approved for a credit card, build your credit scores by making small purchases. Pay your credit card bill in full and on time at the end of each billing cycle.

  7. How Do I Improve My Credit Score?

    A good credit history is like money in the bank. It helps lenders offer you competitive interest rates on loans and credit cards. You're less likely to be asked for deposits from the utility company or mobile phone provider. Good credit also makes qualifying for car loans and home mortgages an easier task.

    Previous mistakes affect your credit reports and credit scores, but you can improve them. Although you might not be able to delete negative but accurate information recorded on your credit reports before seven to 10 years elapses, you can take steps to repair the damage, such as:

    • Pay off any small loans and bring all loans to current status
    • Negotiate and pay off past-due charge-offs, debt collections, or other past-due balances
    • Maintain up to three or four active and positive-reporting accounts
    • Reduce your high balances to less than 30 percent of available credit limits
    • Request a secured credit card if you're denied for an unsecured cardKnow that lenders and businesses extending credit have the power to help or harm your credit scores. Actively monitor your credit reports during the year to ensure that errors are removed and that credit items are accurately reporting.
  8. Are There Different Kinds Of Credit Scores?

    Credit score as it is used in daily conversation is a generic term. Each consumer with a credit history has several different credit scores. The FICO-brand score, developed by a company formerly known as Fair Isaac, is the most commonly used credit score. You have a different FICO score based on credit report information carried by each of the major CRAs.

    Credit score jargon can be confusing. Many books, websites, and blogs refer to the "credit score." In addition to the standard FICO score, newer credit score references, like VantageScore or FAKO score, are now widely used. If you run a small business, you may want to sign up with a business credit bureau to help you build a business credit score.

  9. FICO-Brand Credit Score vs. Other Credit Scores

    There are a number of credit rating bureaus out there, which can make things pretty confusing. For example, you may just assume that your Transunion credit score and your FICO Score are identical.

    FICO Scores are commonly considered an analog for the generic "credit score." Many people mean FICO score when they mention your credit score. However, credit score can also refer to other credit scores in use.

    FAKO credit score is a term that refers to another credit score that isn't a FICO score. If you purchase any of your credit scores from another credit score provider, FICO users quip that it's a "FAKO" credit score. Some credit educators use "FAKO" scores for educational purposes – they aren't used to obtain credit at all. Keep in mind that the FICO score you request can differ from the FICO score used by the lender or business asked to extend credit.

    VantageScore weighs credit report variables differently to the way that most credit scores are calculated. Credit researchers don't know precisely how VantageScore calculates your credit score, so it is difficult to point to precise differences between its formula and other credit score providers. However, it is a joint endeavor between the 3 big credit bureaus so your VantageScore will usually be a pretty accurate reflection of your credit histories at Equifax, Experian, and TransUnion.

    Most lenders and businesses offering credit use the credit score from the provider with whom they maintain a relationship. The lender might use a certain credit bureau's score, a FICO score, or its own proprietary credit score calculation.

    Since 2011, lenders denying or approving your application with less favorable credit terms on the basis of your credit score must provide this information at no cost to you.

  10. How Do I Monitor And Improve My Credit Score?

    Since there are so many different credit scores available, you probably can't try to improve each of them on an individual basis. To improve your credit scores, use the FICO score as the basis. Correcting the information contained in your credit reports is the only way to bring up the FICO scores.

    The cheapest way to monitor your FICO Score is by using a credit card which offers complimentary FICO Score access as a cardholder benefit.

    If you improve the information in each of your credit report by correcting errors or bringing all debts to current or paid-in-full status, your credit scores will rise. As your FICO score increases, FAKO credit scores will follow suit. Keep in mind that Experian doesn't allow FICO to sell credit scores based on consumer credit report information, but Equifax and TransUnion do.

  11. Conclusion

    FICO is still the most commonly used credit score. Most institutions use the FICO score to approve or deny credit. If you want to know how you're doing, check each credit bureau every four months or so without spending money on individual credit score monitoring services.

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