Your Credit Matters
A credit report is a factual record of your payment history. This means that most of us have a credit file detailing how much we owe our creditors, whether we pay our bill on time. Here’sa quick rundown of your credit report and the key information on it. Wait at least one month before taking any action that would make someone look at your credit report. Understanding credit reports and scores In the United States , once every 12 months, each person is entitled to one free credit report per year directly from a credit reporting agency. A lender may see many inquiries on a person’s report as a signal that the person is looking for loans and will possibly consider that person a poor credit risk. Keeping credit inquiries to a minimum can help a person’s credit rating. Hard inquiries from lenders directly affect the borrower’s credit score. Lenders, when granted a permisson by a borrower for the purposes of extending his credit, can check his credit history.
A credit counseling agency, with the client’s permission, can obtain a client’s credit report with no adverse action. A creditor can check a person’s credit periodically. A credit bureau may sell a person’s contact information to an advertiser purchasing a list of people with similar characteristics, like homeowners with excellent credit. An inquiry results in a note on a credit history file. The credit formula also factors in the length of time credit accounts have been open, so closing an account with several years of history is another avoidable credit mistake.
This in turn lowers the percentage of available credit, and the credit score will drop. The credit rating formula looks at the difference between the amount of credit a person has and the amount being used, so closing one or more accounts will reduce your total available credit. Credit cards that are not used: Although it is believed that having too many credit cards can have an adverse effect on a credit score, closing these lines of credit will not improve your score. In 2000 the Federal Financial Institutions Examination Council (FFEIC) clarified guidelines on re-aging accounts for delinquent borrowers. This can dramatically improve the credit score. Re-Aging - Through re-aging, a credit history is re-written and you are given a fresh start on that particular account.
Having a respected profession can improve a credit rating. Signs of responsibility and stability - lenders perceive things such as longevity in the borrower’s home and job (at least two years) as signs of stability. Experts estimate that non-mortgage credit payments each month should not exceed more than 15% of the borrower’s after tax income.
Control of debt : lenders want to see that borrowers are not living beyond their means.
Credit ratings are determined differently in each country, but the factors are similar.
Payment record : A record of bills being overdue will lower the credit rating.
With the adoption of risk-based pricing on almost all lending in the financial services industry, this report has become even more important since it is usually the sole element used to choose the annual percentage rate (APR). This helps determine whether to extend credit, and on what terms. This information is used by lenders such as credit card companies to determine an individual’s or entity’s credit worthiness ; that is, determining an individual’s or entity’s means and willingness to repay an indebtedness.
When a customer fills out an application for credit from a bank , store or credit card company , his or her information is forwarded to a credit bureau , along with constant updates on the status of his or her credit accounts, address or any other changes you may have made since the last time he or she applied for any credit. The term “credit reputation” can either be used synonymous to credit history or to credit score. Credit history or credit report is, in many countries, a record of an individual’s or company’s past borrowing and repaying, including information about late payments and bankruptcy . Under the Fair Credit Reporting Act, you can initiate a dispute in a letter form and it must reference the exact account number shown on the credit report and should state the reason for the dispute (ie: not my account, incorrect balance, never was late, etc.
