All About Credit
Credit reports and scores. What are they and what do they mean?
A credit report is a detailed accounting of an individual’s credit history as prepared by a credit bureau (otherwise known as a credit reporting agency). The data included on the report comes from financial information the credit bureaus collect from lenders, credit card companies and other financial companies. This information will be used by lenders to determine how much of a credit risk an individual is.
Even though a credit score is just a number, it does tell a lot about the way an individual has handled his/her financial life. From reading the credit report, lenders can tell if bills have been paid on time, how much outstanding debt a consumer has (credit card debt, personal loans, car loans, mortgages, home equity loans, student loans and medical debt). The more responsible one is with their use of credit and repayments, the better one’s credit score will be.
Higher credit scores tell potential lenders an individual is less of a credit risk and more apt to repay future bills in a timely manner.
What does this mean for you, the consumer? The individual with better credit scores could potentially be offered better interest rates and higher lines of credit on their credit cards, is likely to receive better interest rates on bank loans and potentially better premiums on various insurance policies. In some instances, prospective employers and landlords may also check credit reports/scores.
It is also important to remember to check one’s credit report annually to ensure against errors as well as fraudulent activity. Consumers are entitled to one free credit report every 12 months from each of the three credit bureaus (Experian, TransUnion and Equifax). www.annualcreditreport.com is a good place to start.
If you have questions, an FCAA member agency is ready to help and answer any questions you may have.