It is quite clear that there are major benefits to maintaining a positive credit history as a good credit is central to both the financial responsibility and financial access. While it is easy to see the consequences of bad credit, it can be downright confusing to actually keep track of your credit, especially if you do not know the difference between credit and credit scores reporting.
Why your reports and significant credit scores?
Before diving into what your reports and credit scores are done, we want to explain why your reports and credit scores matter. Your reports and credit scores are the cornerstone of your financial life, as they help to determine whether you are approved for a credit card, loan or mortgage, and have a major impact on your personal life, as they are factors that help decide if you are allowed to rent an apartment or even get a new cell phone plan. Whether you like it or not, reports and credit scores have much impact on your life, which is why it is essential to understand completely. To help you make this distinction between the two, we detail everything you need to know the reports and credit scores.
What credit reports?
We have already given you the breakdown on credit reports with our series 101, but there are some things that are important enough to repeat. First, there are three major credit reporting companies that create credit reports - Equifax, Experian and TransUnion. Although there are three credit bureaus, not every lender you borrow Information will report to all three bureaus. This means that each bureau credit reports vary slightly, which is why it is important for you to check all three of your credit reports and not just one. In addition to your credit accounts, there are a number of things that are reported to your credit reports, such as your name, social security number, date of birth, current and previous addresses, marital status and more.
How can you check your credit reports?
Although your credit reports may seem untouchable, you can actually check very frequently. In fact, the government allows you to get a copy of your three free credit reports once a year through AnnualCreditReport.com. One thing you'll want to note is that your credit report does not follow your credit score, and you will have to pay a fee to see your credit score.
What are the credit scores?
If your credit report is a report card, indicating the status of individual credit accounts, your credit score can be considered as your GPA. This analogy is commonly used and if true, keep in mind that unlike the average, you can not calculate your own credit score from a credit report, because there are a number of factors that make up your credit score. According to FICO (Fair Isaac Corporation), there are five factors that make up your credit score: payment history (35%), amounts owed or outstanding balances (30%), credit history length (15 %), new credit (10%) and the types of credit you have, such as mortgages and credit cards (10%).
Like credit reports, there are there credit ratings for each of the bureaus (Equifax, Experian and TransUnion). As with credit reports, your credit score are generally not the same for each office because all your credit accounts to report to all three credit reports, which means that calculations may differ from office to office slightly . You can hear the credit scores sometimes called FICO scores. This is because FICO (The Fair Issac cooperation) is one of the most common rating models used by lenders to determine your creditworthiness (or how likely you are to default on a credit account). That said, it really is not necessary to focus on the credit score model (regardless of whether it is FICO, CreditXpert or another model), like all credit scores reflect the same information, which means for all practical purposes, it does not really matter what the rating system is used to generate your score.
How can you check your credit score?
Unlike credit reports, consumers are not entitled to free copies of their credit scores every year, which is why you have to pay a fee if you choose to review them with your credit reports as described above. Even if you do not receive a free copy of your credit score every year - although this can change quickly - it does not mean they are inaccessible, because there are a number of ways you can view them. For example, some credit cards like Discover it - Match Cashback and Barclaycard Arrival World MasterCard Elite more, including providing you with your credit score every month. It should be noted that when checking a credit score is useful, it is not enough, as all three of your credit scores are not the same as detailed above. So while your Experian score can be a 725, your TransUnion score can be a 680, but if you check your TransUnion score, you'd never know it is so low. Ultimately, keeping track of your credit score is more difficult to keep track of your credit reports, yet it is just as important.
Is it possible to keep track of all three reports and scores?
One of the easiest ways to keep track of all three of your reports and your credit scores is to get help from a credit monitoring service. For an affordable monthly fee, these services offer you updated copies of your credit reports and scores on a regular basis, so you can not only be aware of where your credit is sitting, but also be aware if anything ever changes with your credit reports and scores. One thing you'll want to look for when you determine what a credit monitoring service is best for you is that you'll want to choose a service that provides all three of your reports and credit scores, such as monitoring only one or two of your reports and scores are not as effective. Also, if you check one or two of your reports and notes, you may not be aware of fraudulent accounts opened by identity thieves to other reports, which can be a nightmare to deal with as they make havoc on your credit score. Most services that we review, including top-rated options Identity Guard, FreeScoresAndMore, PrivacyGuard and LifeLock Ultimate Plus, give you all three credit reports and scores on a regular basis. In addition, these services have tools to help you determine how certain financial transactions, such as paying a credit card or opening a new credit line will have an impact on your credit score.
Other things to know about the reports and credit scores
Although your reports and credit scores are completely separate things, one thing they have in common is both are generated by the assessment or monitoring your credit history. With this in mind, your credit report is best used as a way to validate the information that lenders and creditors sent the credit bureaus, rather than tracking with your credit health, your pointing credit are best used in this aspect. Another thing to note is that your reports and credit scores are correlated. Since your credit reports have aspects of your credit history, usually derogatory marks on your reports, such as late payments will lower your credit score. Similarly, positive marks on your reports, such as paying credit accounts, will increase your credit score. This is why you absolutely must watch your credit reports frequently, because all errors on your reports reflect poorly on your credit score, even if you do not realize it.
Visit our credit lookout for comparing all the services that we detail in this post, and follow our credit monitoring blog to learn more about your reports and credit scores.
Disclaimer: This content is not provided or commissioned by the companies mentioned in this article. The views expressed here are solely the author and have not been reviewed, approved or otherwise endorsed by the companies mentioned. NextAdvisor.com can be compensated by the advertiser affiliate programs.