Your Credit Report is the Key to Your Future
Contributed by Andrea P
What is a Credit Report?
Very simply, your credit report is a document that determines your eligibility for credit. Agencies may use your credit report to decide whether to approve an application for a credit card, mortgage loan, car or cell phone. Your credit report consists of five basic areas upon which lenders base their evaluation. These are a consumer's payment history, amounts owed, length of credit history, new credit applied for or taken out, and types of credit used.
Your FICO score may be tallied according to the aforementioned criteria. FICO (Fair, Isaac & Company) is a credit model used to determine the reliability of a credit applicant and may range anywhere from 300-850. The lower your FICO score, the worse your credit will appear to potential lenders.
How a Negative Credit Report Can Affect Major Life Decisions
Bad credit can affect both major and minor aspects of your life. While getting turned down for a cell phone because of bad credit can be a minor irritant, getting turn down for a mortgage loan can be devastating. Also, the interest rate for any type of loan or credit card will rise proportionately depending on the unattractiveness of your FICO score.
Bad credit items may remain on your report for up to ten years. If you were ever contacted by a collection agency or delinquent on an account, creditors will see this history on your report.
Unfortunately, many people do not realize just how bad their credit is until it's too late.
What You Can Do To Improve Your Credit Report & Increase Your FICO Score
Your first step is to request a credit report from all three of the major credit bureaus (Experian, TransUnion and Equifax). Carefully evaluate the form to make sure that all information is accurate including name, address and social security number. In addition, be sure to review each section in detail to spot problem areas that need to be rectified. Since credit bureaus will provide you with the "consumer" friendly version of your report, it should be fairly easy to find this information. If you notice any discrepancies, you may contact the credit bureau to investigate these items.
