A credit score is a number generated by a statistical system used to rate the credit of an applicants according to various characteristics relating to creditworthiness.
More On Credit Score
A credit report is compiled by a credit bureau which uses your personal information, credit history and public record to create the credit report. It is then summed up with a credit score.
The credit score is an easy way for lenders to know if you are a good loan risk. It is a three digit number, and generally a higher number is considered better. Each individual lender decides what number equals a good credit risk for them. The credit score expedites the approval process for both you and the lender. Instead of the lender having to pore over a credit report, the credit bureau provides a summary of that report symbolized by the credit score.
The first aspect of a credit report is your personal information. This includes your full name as well as any previous names you may have used. It also includes your Social Security number and date of birth. In addition, the personal information of your credit report includes your current and past addresses, your current and past phone numbers, and your current and past employers.
A credit report also involves your credit history. It includes a variety of financial information about you. For example, it shows all of your open and closed accounts as well as the start dates for those accounts. It also shows your credit limits, loan amounts, and outstanding balances. The credit history keeps record of your payments and payment patterns and reflects any co-borrowers or co-signers on any of your loans. Finally, a credit history keeps track of any inquiries into your credit scores.
Lastly, the credit report shows the public record associated with you. If you have been overdue on child support payments, have a tax lien, or have any bankruptcies, this information is a part of the public record and is included in a credit report.
It is important to maintain a good credit report. A surprising number of institutions and people legally have access to your credit report. These include lenders, insurers, retailers, landlords and even potential employers. Your credit report can not only affect your ability to get a loan and its terms, it also can affect your ability to get a job, insurance or an apartment.
You can maintain a good credit score by keeping a good credit history. Pay your debts on time. Don’t miss a payment, even if that means you can only make the minimum payment each month. Also, reduce any outstanding debt. Don’t let credit card debt hang over your head – work to pay it off as soon as possible. And, don’t open any unnecessary accounts. Almost every transaction begins at a retailer with the question, “Would you like to save 10 percent today?” As tempting as it can be to get a quick discount, this can cause long-term damage. Even if you do not keep a balance on store credit cards, it hurts your credit history. The inquiry into your credit and the open account lowers your credit score.