What is a Credit Report?
What Your Credit Report Means
Your Credit Report -
What It Is and How it
Affects You
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Your credit report is a snapshot of your credit history. It, almost by itself, will
determine your eligibility for future credit. One of the main determinants on the
report is your credit score, a distillation of your credit history into a three digit
number. This number is called the FICO score. It is named after the  Fair Isaac
Corporation, who invented the computer software used to derive it. Obviously your
credit report needs to reflect a good risk in order for lenders to extend you
favorable credit terms, or in some cases, any credit at all.  If you have good credit
it is vital that this report is correct. If you have any incorrect negative credit
notations on your report, it is imperative you contact the reporting agency in
writing and dispute the negative credit entries without delay.

Credit reports are obtained by lenders from one of the three major credit reporting
agencies; Experian, Equafax (TRW), and TransUnion. They will assemble data
reported to them from utility companies, credit card companies, banks, credit
unions, mortgage companies and other lenders. When an account is started at a
lender, it is reported to the credit reporting agencies. Each month the account is
open, the lender sends a report to the credit reporting agency. Lenders, landlords
and employers then purchase these reports to assist them in assessing credit risk.

Usually all three get the same information but not all the time. On occasion, an entry
will show on one agencies report that is absent on the others. You can now receive
a free copy of your credit report from each of the three credit reporting agencies
once a year. You should take advantage of this opportunity. Stagger your requests
so you receive a report about once every four months. Note any changes or
incorrect entries and evaluate them. If they are incorrect, take action at once.

You can get all three copies of your credit report from Experian - for free -  
click
here. (Trial Offer - Billed for monitoring service after trial expires)

It's important that you get your reports so you're aware of exactly what your report
contains.

What Is On Your Credit Report?
Your address and past addresses will be on the report along with personal
information such as your social security number and telephone number. Credit
items that are reported include both positive and negative credit activity. Negative
credit items such as, late payments, foreclosures, ,judgments, collections and other
negative factors. Other items included in the evaluation are home ownership, the
length of your credit history and the type of credit you have had. Installment loans,
those with regular monthly payments, are usually more beneficial to your credit
history than credit cards with variable payments.

Negative items from the past seven years can all be contained in your credit report.
Bankruptcies may be reported for ten years and obviously have a very negative
impact on your credit score. Mortgages and other debt over $150,000 may remain
on your credit report permanently. Negative reports of large debts can follow you
around for the rest of your life.

In short, these are the
five things used to calculate your credit score and
approximately how much they affect on the total score:
* Your Payment History - 35%
* How Much You Owe - In total and on each debt - This is used to calculate your
debt to income ratio, an indication of your ability to take on additional credit
obligations. - 30%
* Length of Your Credit History - Obviously, the longer you've shown you can
consistently pay off your debts in a timely fashion, the more positive impact on
your credit score. - 15%
* What Kind  of Credit You Have Used - Having a mixture of different types of
credit accounts results in a higher credit score. Typically having all credit cards is
not as favorable as having a combination of different credit types, say, a few credit
cards, a car loan, and a mortgage. -  10%
* Any New Credit - The important thing to lenders in this category is that you are
not suddenly attempting to open many different credit accounts. Doing so could
negatively impact your FICO score. - 10%

As you can see, the most important thing used to determine your credit score is
your payment history. That is why it is so important to refrain from making any
late payments. Payments over 30 days late are the worst for your report. In many
cases, but not all,  those payments less than 30 days late will not be on your report.
It is so important to check your credit report regularly for errors and vigorously
dispute any incorrect entries. Depending on the study you look at, between 20%
and 30% of credit reports contained factual errors that adversely affected the credit
score.

Credit Report Notations and What They Mean
If you look at your credit report, you'll see various notations by each entry. What
do they mean? Here's a brief explanation of your credit report notations.
R1 or I1 = paid on time, or at least no more than 29 days past due date
R2 or I2 = paid 30-59 days past its' due date
R3 or I3 = paid 60-89 days past its' due date
R4 or I4 = paid 90-119 days past its' due date
R5 or I5 = 120 days past due.

FICO credit scores
Credit scores and  risk levels perceived by lending institutions:

* Excellent: over 750
* Very good: 720 to 749
* Acceptable: 680 to 720
* Uncertain: 620 to 679
* High risk: less than 620.
Note: FICO scores are viewed differently by individual institutions according to
each institution's internal policy.
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