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We've all heard of it. We all know we have one
and have probably spent a fair amount of time thinking about it,
but the fact of the matter is that most people have never seen
theirs. So, what is it? Our credit report. Oddly enough, even
though our credit report influences just about every aspect of
our financial life, most of us have never even seen ours, 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 it is
that is keeping you from getting the credit that you may need.
What Is A Credit Report?
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A credit report is a document that includes all your pertinent
personal and financial information. It will contain your full
legal name, your social security number, previous and current
addresses, date of birth, and current and previous employers.
This information has been obtained from any previous credit
applications you have filled out.
This report will also include 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 include the names of any other persons
that may be responsible for payment on these accounts. |
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Any financial situations that you have been involved in that are
public record will also be included. This means that judgments,
tax liens, bankruptcies, overdue child support, etc., will also
show up on this report.
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 Is It Important?
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 is what will be used by companies to
determine whether you are a safe financial risk or not. In order
to even 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 six 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 what your score will be. Your credit score will
influence not only the decision to give you the loan or credit
card, but also the amount of interest to attach to the line of
credit. The higher your credit score, the lower your interest
rate and vice versa.
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.
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