When it comes to taking out a loan, every lender will review many financial elements to determine if you’re a qualified or risky candidate to lend to. Most importantly, every lender will review your credit score. Most of us know it’s important to “have good credit.” But what does that really mean? Below, we break down the important components that make up your credit report.
Every credit report contains a few financial basics, like your credit history, what kinds of credit cards you use, how long the account has been open, current, and available balance and the timeliness of your payments. But credit reports also get personal. Things like where you live, if any liens or judgments have been filed against you, and if you’ve filed for bankruptcy will all come to the surface. Even though there are three different credit reporting agencies, they all pull basically the same information.
Equifax, Experian and TransUnion are the three main Credit Bureaus in the United States. They collect credit information from multiple places (like your financial institution, credit issuers, lenders, collection agencies and courts) to put together your credit report. Simply put: Your credit report is an online file that sheds light on your previous and current credit history.
The scoreYour credit score is generated by FICO – a company that specializes in taking information and analyzing it to create what is known as a FICO score which according to FICO.com, predicts how likely you are to pay back a loan. That’s important information for a lender. Scores range from 300 to 850. The higher the score is, the lower the risk is for the lender to give you a loan.
Interested in learning more about credit scores and reports? Visit FICO’s website for an index of content!