Are you one of the tens of millions of people in the United States with imperfect, flawed, damaged, or
impaired credit? Are you one of the 70% of Americans that do not know that you have a credit score?
Maybe your credit is okay, but you’d still like to make it better to benefit your interest rates when securing a credit
card, car loan, or mortgage?
Scores under 620 can make it very difficult to obtain loans and credit cards with reasonable terms.
Understanding Your Credit Report
Many people have questions about their credit report. We are often asked, what is a credit report? What information
does it contain? And where does this information come from? People often feel overwhelmed by the thought of their credit
history and they feel that they have no control over the information it contains. Rest assured, you can understand it and
you do have control over the information it contains.
A credit report is broken down into the four following sections; identifying information, credit history, public records
Identifying information is the information used to identify you, such as:
Social Security Number
Drivers License Number
Current and Previous Addresses
Date of Birth
Current and Previous Employers
Credit history is where each individual credit account or trade lines are listed. It reflects:
Whether the account is in your name or with another person (joint)
The date the account was opened
The amount of the loan
The high credit limit or the highest balance on the account
How much you owe
Fixed monthly payment or minimum payment amount
The account status such as open, closed, inactive, or paid.
Your payment history is reflected as to whether you take 30, 60, 90, or 120 days to pay
Whether the account has been turned over to a collection agency
Whether the account has been discharged in a bankruptcy or
Whether you are disputing any charges
Many businesses provide information to the credit bureaus only when an account is past due or a creditor has taken
collection action against you. Creditors who generally report accounts when they are past due or in
collections include property managers, utility companies, doctors and hospitals, lawyers, insurance companies, and other
Public Records. If you have had a bankruptcy, judgment, foreclosure, child support delinquency or tax
lien it will be listed in the public records section of your report. Public records are maintained by government agencies
and are accessible to anyone, local, state and federal court filings are public records.
Anyone who has reviewed your credit history in the last two years will be listed in the last section:
Credit inquiries fall into the two types of categories:
Hard inquiries, which are inquires you the consumer initiate when you apply for credit.
Soft inquiries, which are from companies who are monitoring your credit, such as creditors or companies who
sent out promotional materials based on your credit rating such as bankcard companies.
What is in a Credit Score?
A credit score is a 3-digit number between 300-850. A credit score is used by lenders to determine whether a person
qualifies for a particular credit card, loan, or other service. Property managers and sometimes employers use this score to
evaluate their own risk in entering agreements with you for property or evaluating you for employment. They are
specifically evaluating the likelihood that a person will make payments on time. Generally the higher the score the less
risk a person represents. Scores 720 and above are usually considered a safe risk and receive loans with lower interest
How is a Credit Score Determined?
A credit score is a mathematical model used to evaluate information on a credit file. The date is grouped together in
five categories as follows:
35% Payment History
Having a good payment history reflects that you make payments on time and do not miss payments on credit accounts. This
is one of the most important items a lender will look for.
The presence of adverse public records such as bankruptcy, judgments, liens, collections, or delinquencies (past due items),
as well as the severity of the delinquency, the amounts past due, the time since the delinquencies or negative items were
reported, as well as the number of adverse items on the report are all considered.
30% Amounts Owed
This is a measurement of the amount you owe in proportion to the total credit limits you have available. Someone who is
closer to their maximum credit line is deemed a higher risk for late payments than someone showing larger available credit
15% Length of Credit History
The credit-scoring model considers your oldest account and the average age of all your accounts. It is a good reflection on
your credit report to have an account with a long history.
10% New Credit
The number of recently opened accounts and the type of account can affect your score. Also multiple credit inquiries can
represent a greater risk.
Types of Credit
The type of credit you have in use is considered, your mix of credit cards, mortgage loans, installment loans and consumer
finance accounts affect your credit score.
A credit score takes into consideration all of these categories to determine your score. Remember your credit score is a
consideration of both the positive and any negative information in your credit report.
Where do Credit Reporting Agencies Receive all their Information?
Where does all the information contained in your credit report come from and how does it get to the credit bureaus? The
personal information comes from the information you listed on all credit applications you filled out in the past. The
details on your credit account are supplied by the creditors to the credit reporting agencies including the date the
account was opened, the credit limit or loan amount, the payment terms, balance and payment history, payment terms, and
account status (closed, open, inactive). All credit-reporting agencies record inquiries whenever another party such as
lenders, landlords, service providers or insurers views your credit report. Government agencies report all matters of
public record to the credit reporting agencies.
Strategies to Maintain and Improve Your Credit Standing:
1. Always pay your bills on time. Payment history comprises a large portion of your credit score. Paying bills on time
will have a large impact on your score.
2. Pay down your credit card balances. Having low credit balances and more available credit will raise your credit score.
3. Check your credit limits. You may have a higher limit than is being reflected on your credit report. Issuers will quickly
update this information.
4. Use your credit card lightly; do not max out your credit cards. This affects your debt to available credit ratio, which
will lower your score.
5. Do not close unused credit card accounts. Keeping accounts open shows more available credit and if those cards have been
on your report for some time they show positive account history and established accounts.
6. Avoid opening a lot of new accounts in a small period of time. Opening a lot of account in a short time will make lenders
less confident in your ability to pay and build a good history.
7. Rotate the use of your cards. Inactivity or dormant accounts will not help your score. Even if it is a small recurring
charge on an account this will helpyour credit reporting history.