Your Credit Report And Why It Matters

We've all heard of it. We all know we have one, and have probably spent a fair amount of time thinking about it.

Our credit report. Oddly enough, even though it influences just about every aspect of our financial life, most of us have never even seen our own credit report, let alone know what our FICO or credit score is.

Not only will understanding your credit report help you make important financial decisions, it can also help you see just what is standing in the way of your getting the credit you may need.

What Is A Credit Report?

A credit report is a document that includes all your pertinent personal and financial information. It contains your full legal name, your date of birth, your social security number, previous and current addresses, as well as previous and current employers. This information has been obtained from any previous credit applications you have filled out.

This report will also contain information about any financial accounts you have now or have had in the past. This will include any loans, credit cards and their credit limits, monthly bills, and so on. It will also list the names of any other persons who may be responsible for payment on these accounts.

What Information Is Included?

Any financial situations that you have been involved in that are public record will also be included. This means that legal judgments, tax liens, bankruptcies, overdue child support, etc., will also show up on this report.

Credit inquiries are also marked on your credit report. Anytime you apply for a loan, credit card, or anything that requires an institution to request a copy of your credit report, it will be noted.

What Is My Credit Score and Why Should I Care?

Basically, your credit score is based on a mathematical equation that evaluates all the information on your credit report. The end result is called your FICO Score. FICO stands for Fair, Isaac, and Company, the organization that developed the scoring mechanism. This score will be used by companies to determine whether you are a safe financial risk. In order to have a FICO score, you must have at least one open account on your credit report, and that account needs to have been open for at least 6 months.

Your score is influenced by your financial history. Outstanding debts past 30 days, consistent late payments on monthly bills, and any collection action that has been brought against you will determine your score. Your credit score will influence not only the decision to give you a loan or credit card, but also the amount of interest attached to the line of credit. The higher your credit score, the lower your interest rate, and vice versa.

Cleaning Up Your Report

Knowing and understanding your credit report is vital to getting a mortgage, car loan, and even renting an apartment or getting a job. If you have never seen your credit report, check it out soon. There is a chance that yours may contain errors, and it's critical that you get those errors cleaned up quickly.