Below, we explain what goes into a credit report, how it is tracked, and why your credit report is important.
What makes up your credit report, and why is it important?
What’s In A Credit Report?
What affects credit score?
90% of lenders use scores comprised by FICO reporting companies when it comes time to make a lending decision. FICO companies are Equifax, Experian and TransUnion. Most subsidiary companies such as loaning companies, banks and credit score applications are reliant on the information provided by FICO-based credit reporting agencies. Per their website, a FICO score is comprised by:
Payment history is the most important chunk of information that FICO scoring accounts for. This monitors whether or not you’ve made paid accounts on time in the past. The second collection of data that is pivotal to your FICO scoring is the amounts that are owed, simply meaning the amount you owe in credit or via loans. The more you owe on your credit line, the more likely it is to affect your credit score.
Third, FICO tracks how long your accounts have been open. A long and positive track record is more reliable than a short and positive track record. Next, the type of credit in your credit report has to do with the different types of accounts you have open and their respective amounts.
Lastly, monitoring new credit lines indicates the potential for a swing in your credit score. You should try to check all three FICO-based scoring companies, because they may have a slightly different credit score number for you and companies may have a different method than you when it comes time to check credit score.
Why is your credit report important?
As finances become more and more challenging, understanding your credit report is crucial when it comes time to make key financial decisions. Lending companies and card companies will be looking at your credit report when it comes time to make these decisions; including approval of credit cards and loans, or even a mortgage or auto loan. Often, landlords view your credit report before signing onto a lease to show stable financial history, and sometimes your credit report can be part of the application process for a new job.
Because your credit report becomes such an important aspect of these decisions, it’s best to stay ahead and aware of how you score in your credit report. First and foremost, it is a good idea to monitor your credit report routinely. Make sure to check your credit score often, and stay on top of payments. Your credit report can be daunting, but with a steady mindset and an ability to stay on top and aware of your credit report, it will remain positive and accurate.