Credit Reports and Credit Scores

What a Consumer Must Know About His or Her Financial History

Jul 1, 2009

How can a consumer be certain he or she has good credit? Learn the basics of credit reports and credit scores, and what it is expected from lenders and credit bureaus.

When playing the financial "numbers game," it's important to know where the consumer stands. By understanding the basics of credit reports as well as credit scores, a consumer can stay on top of his or her credit history.

Lenders and Credit History

When it comes to credit history, banks and creditors are always taking a sneak peek. Before a consumer is able to borrow money, lenders want to know how that individual has fared in the past.

If a consumer has a good track record of being responsible and paying back what he or she has owed, chances are that individual is in good stead. A consumer’s credit history determines how much credit they can currently receive. The more trust a person has shown...the more that person will be trusted.

Credit Bureaus

In the United States, Equifax, Experian, and TransUnion are the three major credit bureaus. The consumer needs to be familiar with these bureaus and understand they "hold the cards" in respect to an individuals credit history. Credit bureaus monitor a consumer’s credit history and keep track of how the debt was repaid.

Credit bureaus know if the customer has paid on time, if that individual still owes money, and they also know if and when an individual has failed to meet financial responsibilities. The consumer is always being watched, so it's wise to fulfill credit obligations in order to improve ones overall credit score.

What Do Credit Reports Include

Credit reports include basic personal and financial information concerning the consumer. Identity information, account history, data records and inquiries into a consumer’s credit history are the main four areas that a credit report traditionally covers. Credit reports cover all the grounds, which is even more reason the consumer should be responsible and wise when borrowing and/or owing money.

Credit Report Errors, FICO Score

If a consumer finds a mistake on his or her credit report, it's vital to contact the credit bureau and address the situation. If an error goes uncorrected, it can adversely affect the ability to borrow money in the future.

The FICO score, created by Fair Isaac is the formula used to convert a consumer’s credit score into a three-digit number. This process allows lenders and consumers alike to make the best decision(s) based on the score. FICO ranges from 300 to 850 on the scoring grid. Simply put, the higher the score, the better the consumer will fare.

Importance of Good Credit

Good and bad credit alike can have a huge impact on many other areas of a consumer’s life outside of the obvious. Bad credit can stifle a person’s ability to apply for a job, get a cell phone plan, buy a car, etc. An individual needs to stay on top of his or her credit report and credit score to avoid a future of financial difficulties.

The copyright of the article Credit Reports and Credit Scores in Personal Debt Management is owned by Bryan Parker. Permission to republish Credit Reports and Credit Scores in print or online must be granted by the author in writing.