Credit Report – How Your Credit Score is DeterminedWritten by Charles Essmeier
Most consumers are aware that they have something known as a credit report that is used to determine whether or not they would qualify for a loan. Fewer are familiar with FICO score, a creation of Fair, Isaac, and Co. which distills their entire credit report down to a three-digit numeral. What, exactly, is this score? How is it compiled? Can anything be done to improve it?
The FICO credit score is used by all three major credit bureaus – Experian, Trans Union and Equifax. They are companies that keep track of credit and lending transactions of millions of Americans. The score is used to provide, in a nutshell, a figure that represents credit-worthiness of a consumer. That score, which ranges from a low of 300 to a high of 850, is used in many ways by businesses and employers. The score is used by insurance companies to set rates, landlords to establish security deposits, and even prospective employers to determine whether hiring someone is a good risk. Despite importance of credit scores in their lives, few Americans understand how it works.
The score is determined by a variety of factors, each of which makes up a portion of score:
Approximately one third of score represents individual’s payment history. Previous loans, and ability to pay them are shown in this portion of score. Both late payments and failure to pay at all affect this portion of score. Those who have paid all of his
| | Home Loans – Repair Your Credit Before You BuyWritten by Charles Essmeier
Before you take out a home loan or make any major purchase, you should be aware that any prospective lender will want to take a look at your credit report. Your credit report is a record of all of your past financial dealings, and any loans, credit cards, judgements, bankruptcies or other major financial transactions are listed there. Along with your credit report will come your credit score, which is a three digit number between 300 and 850 that represents a distillation of all of above. That score represents your entire financial life, and your ability to obtain financing for any major purchase depends on having a good one. What if you don’t have a good record? Should you go to one of those companies that promise to repair your credit? What you should do is repair it yourself.
The idea of credit repair is a myth. There is no magic solution to fixing problem credit, and any company that promises to do so is only interested in your cash. Your credit report and score are maintained by three separate credit bureaus that keep pretty accurate accounts of all financial dealings done under your Social Security number. There is no way to quickly “fix” a faulty credit report. You can, however, fix it yourself and fix it for free. It
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