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Credit Reports
 ASAP Credit Card - Copyright 2010
    What is a credit report and what's it used for?
    What is a credit score-- why is it important?
    What factors help determine my credit score?
    5 reasons to check your credit report regularly
 
 
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What is a credit report?

In much the same way that a resume displays your work experience to a prospective employer, a credit report provides prospective creditors (and in some cases employers and insurers too) with a detailed picture of your credit history.

The three major credit reporting agencies are Equifax, Experian, and TransUnion. These agencies, which are also called "bureaus," collect and report information about consumers' financial habits and put the information into a credit report.

Each agency's reports contain the same basic information: name, Social Security number, current and previous addresses, details about loans and how they've been handled, public record information such as bankruptcies, court judgments, or liens, and a list of companies that have reviewed your credit.

In most cases, your credit report influences whether or not you will receive what you are applying for.

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What is a credit score?

A credit score number is often called a FICO score, for Fair, Isaac and Co., the California company that developed the system upon which it is based. The score is supposed to distill all the information in your credit report, using a formula to calculate a single number that indicates your credit worthiness.

It's designed to give lenders a fast, accurate prediction of the risk involved in giving you a credit card or loan. Lenders have attested to the score's value in streamlining the underwriting process and creating more opportunities for consumers to get mortgages as well.

Scores range from the 300s to about 900, with the vast majority of folks falling in the 600s and 700s. The higher the score, the better.

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What factors determine my credit score?

When determining how high a score will be, five characteristics are considered above all. In order of score significance:

  1. Past delinquency: People who have failed to make payments in the past tend to do the same in the future.

  2. The way credit has been used: Someone who is maxed out or close to the limit on a credit card is considered a greater risk than someone who doesn't look at the high credit line as a license to print money.

  3. The age of the credit file: Fair, Isaac's model assumes people who have had credit for a long time are less risky.

  4. The number of times a person asks for credit: The system frowns upon those who have initiated several requests for credit cards, loans or other debt instruments over a short period.

  5. A customer's mix of credit: Someone with only a secured credit card is generally riskier than someone who has a combination of installment and revolving loans. (On installment loans, a person borrows money once and makes fixed payments until the balance is gone, while revolving borrowers make regular payments, each of which frees up more money to access.)

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5 reasons to check your credit:

Ideally, your credit report is an accurate, up-to-date reflection of your credit history. However, since we don't live in an ideal world, there are many reasons that your credit report could contain inaccuracies that might prevent you from receiving the credit you deserve. The good news is you can take action to keep your report accurate.

Here are FIVE REASONS why you should make a practice of regularly reviewing your credit report:

  1. Inaccuracies & Mixed Credit Files: Many inaccuracies on a credit report can be the result of simple human error, and are therefore are not difficult to dispute. Whether the inaccuracies relate to payments not credited, late payments, or data mixed in from the credit file of someone else with a name similar to yours, you will want to contact the credit bureau to dispute inaccurate information promptly.

  2. Tracking & Payments: One of the most important elements of credit is a demonstrated history of on time payments. Once you send the check though, anything can happen--a delay in the payment being received can kick you over to a 30-day delinquency. This has a negaive affect on your credit, and creditors don't take it lightly. If you call your creditor and explain the situation, they might adjust the info, but you need your credit report to know whether you have a delinquency or not.

  3. Identity Theft: This issue alone is reason to order your credit report immediately. Identity theft is an insidious crime, involving a thief who assumes your name to open new accounts, divert your card statements to another address, and run up all sorts of bad debt without you ever knowing about it until collectors come calling. The best way to catch a thief who is using your name is by getting a copy of your credit report, which will show you if there are accounts listed you know you haven't opened. For example, if a thief has intercepted a pre-approved credit card offer in your name and sent it in with a change of address, your credit report will include the account.

  4. Inquiries: If you're shopping around for a loan or more credit, you should know when creditors check your credit, it places an inquiry on your credit report. Inquiries can add up, which is often interpreted as negative by creditors. For this reason, too many inquiries can actually make getting credit more difficult. Moreover, if you didn't authorize someone to look at your credit report and they did, they may have broken the law. Who's been looking at your credit?

  5. Credit Fraud--Unauthorized Charges: Credit fraud involves the theft of your credit card or account number to make unauthorized charges to your account. Though consumers are protected financially from this abuse, other creditors may take note of all this activity and decide to raise your interest rates or refuse to grant you a loan. Ordering your credit report will help you catch new activity on accounts that you haven't been using, or may have closed. When it comes to managing your credit worthiness, your credit report is your best resource. Your credit report gives you the opportunity to manage your credit wisely today, while planning your credit strategy for future goals.

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  Other Sections:  
  Credit Basics: Learn about the basics of credit and it's effect torwards your future!
  Establish Credit: Learn how to get your credit started and improve your finances!
  Maintain Credit: Keep your credit and finances on the right track and avoid pitfalls!
  Security / Fraud: Avoid common mistakes and protect yourself from identity thieves!
  Credit Resources: Find other helpful credit resources to assist you with your finances!

 

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