Your credit history. Three simple words that can determine the
outcome of our financial success. Your credit history
influences any and all decisions that a company or institution
will make when considering you as a credit risk. Because of its
importance, knowing and understanding what your credit report
says about you is vital.
Your Credit Report
Your credit report is a document that will show your personal
and financial information, good and bad. Your score is based on
this information and is called your FICO score. The higher the
FICO score the better. This information is reported by all
three major credit bureaus, Equifax, Experian (formerly TRW),
and TransUnion. Any time you apply for credit of any kind, the
lender will contact one of these credit bureaus to obtain a
copy of your credit report.
This all sounds pretty technical but what it boils down to is
this, your credit score will influence all future financial
decisions. That is why it is so vitally important that you keep
track of your score and read your report regularly. Mistakes can
and have been made. Keeping track of your report will help you
to find these mistakes and resolve them in a timely manner.
What Your Score Means For You
Pretty much everything. As I mentioned above, your credit score
will influence the decisions that companies make when you apply
for credit. If your credit is less than perfect, you may be
turned down or at least given a higher interest rate than
someone who has a higher score. Problems can stay on your
report for as long as two years even after they have been
resolved.
What Influences Your Score
Your payment history is one of the main influences. Have you
paid your bills on time? If you have routinely been late with
payments, your score will be negatively affected.
How much outstanding debt you have is also a factor. This
includes the outstanding balance on any loans you may have as
well as the credit limits on any credit cards you may have. If
you have multiple credit cards and these cards all have high
credit limits, even if you don't carry a balance on these
cards, the possibility still exists that you will someday
charge all these cards to their limits. This possibility alone
will negatively affect your credit score.
The length of your credit history is also a factor.
Surprisingly, no credit history can work against you. With
nothing to go on, the company has no idea as to just how you
will handle your credit.
Obtaining Your Report
Since January of 2004, all credit bureaus are required to give
you one copy of your credit report for free each year. Although
the credit report is free, they can charge you for your FICO
score. Contact any of the major credit bureaus either online or
by phone and see what their policy is.
About The Author: Keith Baxter made it his mission after
college to educate as many people as possible to the advantages
and disadvantages of credit through a widespread re-education
initiative. You can find out more about Keith and what he's up
to at http://www.thebankcreditcardlist.com.
