Credit Reports: More Than Just a Financial Report Card
Using credit reports as a tool to approve loans is standard practice today. In addition, landlords may obtain credit reports to judge prospective tenants and employers may use them to consider new hires. Credit reports are commonly viewed as a means to predict a person's likelihood to repay debt and in general, act in a financially responsible manner.
What's in a credit report?
Your credit report is a history of your credit behavior. It will list such details as:
- what companies have extended credit to you
- the length of time your accounts have been open
- the amount of credit you've used
- and whether you've paid your bills on time
The three major credit bureaus -- Equifax, Experian and TransUnion -- receive numerous bits of information on a monthly basis. The information comes from:
- retailers
- financial institutions
- credit card companies
- finance companies
The credit bureaus also collect public record information from state and county courts, and information on overdue debt from collection agencies. All these bits of information are compiled and tabulated to create your credit report.
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Credit Report…
Credit Score…
What's the Difference?
• A credit score is created using a complex mathematical equation based on the information in your credit report
• The credit score is a way to bring all the many bits of information into one convenient snapshot of your financial standing
Many lenders rely on a scoring model devised by the Fair Isaac Corporation called the FICO ® Credit Score. The FICO score is based on the following information found in the credit report:
• payment history
• amounts owed
• length of history
• new credit
• types of credit in use
FICO scores range from 300 to 850.
