Why is My Credit Report So Important Anyway?
A Credit Article Contributed by Melanie Vannuys
What is a Credit Report?
A credit report is a factual record of your credit payment history. The information in your credit report is provided to companies by the three major credit bureaus - Experian, TransUnion and Equifax, Inc. Why you ask? Your credit report helps a credit grantor decide whether or not to grant you credit. Your credit report is generated from your credit file and kept in a database maintained by one of the credit bureaus.
According to the Credit Report Directory, more than 205 million people in the United States have at least one form of major credit and each of them has a credit file based on the information obtained from the companies you have credit with.
Standard information that can be found in your credit report is your name, address, telephone number and social security number.
Any major financial transaction will result in changes to your credit report. Bankruptcies, divorces, and unpaid credit cards, for example, can negatively affect your credit. Even applying for new credit can affect your report. Credit grantors may deny you credit based on what they feel are "excessive inquiries." These excessive inquiries may put up a "red flag" to a potential grantor that you are overextending yourself or that you are in financial difficulty.
What's My Credit Report Score Anyway?
Credit scoring has been around since the 1950s. Credit scores indicate your credit worthiness. Your credit score is determined by comparing your current credit history and current credit accounts to statistical models. Once your credit score is determined, the decision is made by a creditor to grant credit - or not.
Get a Free Credit Report
If you think your credit report may not be up to par, the first thing you should do is obtain a copy. You can obtain a free copy of your credit report on the Internet or by contacting one of the three major credit bureaus mentioned earlier.
Once you have received your report, read through everything and make sure the entire report is correct. Once that is complete, there are several things you can do to begin credit repair. According to the Credit Report Directory, here is a list of things you should do to improve your credit score:
* Pay your bills on time;
* Check your credit report and remove any errors;
* Keep your debt reasonable;
* Maintain only a reasonable amount of unused credit – having too much unused credit can make you a credit risk.
* Avoid too many inquiries
Credit doesn't have to be scary, but it is one of the most important things in your life. Without good credit, it may be difficult to do the simpler things in life, such as having utilities connected at your home. Bad credit makes it nearly impossible to obtain a mortgage or a new car loan. Good credit can open the door to financial freedom. Take care of it and it will take care of you.
