Understanding Credit Score and Your Credit Report

Reviewing your credit report and understanding credit score are important because they directly affect receiving any financing or loans. Your credit score may even be checked when you apply for insurance or a job. Employers may look at how well you handle your personal finances as an indicator of how well you will take care of your professional responsibilities.


Understanding Credit Score

The main developer of credit scores is called Fair, Isaac Co (FICO). Credit (or FICO) scores range from 300-850, with higher being better. The national average score is about 680.

Every lender sets up credit score cutoffs, but usually you can expect the following:

300-549: Very difficult to find any lender to give you credit.

550-619: You may be able to find credit with very high interest rates and fees.

620-679: You probably can obtain credit at a higher interest rate.

680-749: You should have no problem getting credit and you will receive good interest rates and repayment terms.

750-850: Lenders are happy to offer you credit with their best rates and terms.

About Your Credit Report

In understanding credit score, it's helpful to know what's included on a credit report. Credit reports detail such personal information as:

• Where you work.
• Where you live.
• Have you ever been convicted of a crime?
• Have you ever been involved in a lawsuit or claim?
• How you pay your bills.

Credit reports are kept by consumer reporting agencies (CRAs). These credit bureaus collect, compile, and sell your credit information to businesses. The three major credit bureaus may have different information about you. Compare and check all your credit files from all the top agencies: Experian, TransUnion, and Equifax.

If you are denied credit, you have the right to get the credit bureau's name, address, and all contact information and receive a copy of a free report within 60 days of a denial.

In addition, you are entitled to one free credit report (not including your credit score) each year from each agency. You can order your free reports at www.annualcreditreport.com.

After you obtain a copy of your credit report, go through it and note any incorrect information. Then, contact the credit reporting agency by writing a letter. Or, if you get an online report, you can file your dispute online.

Date

Your Name
Address
City, State, Zip Code


Complaint/Dispute Department
Name of Credit Reporting Bureau
Address
City, State, Postal Code

Attached is a copy of a credit report I received. The items of dispute are circled on the attached copy.

[List the disputed items, including the credit account number, name of the creditor, and the type of item, such as credit account or judgment etc.]

This above item is inaccurate because [explain what item is inaccurate or incomplete and why]. I am requesting that the above named item be removed or corrected [or state the specific change].

Attached you will find copies [describe any enclosures that depict a record of payments or any court documents] that support my position. Please research this issue and [remove or amend] the disputed item(s) as soon as possible.

Regards,

Your name

Enclosures: [List what you are enclosing. Only include copies of the documents and keep the originals.]

Accurate But Negative Credit Report Information

In understanding credit score, realize that if the negative information on your report is accurate, the information must remain for a specific amount of time. Usually, the time limit is seven months; however, exceptions include:

• Information about criminal convictions may be reported for an unlimited time.
• Credit information provided in response to an application for a salary position over $75,000 does not have a time limit.
• Bankruptcy information can remain on a report up to ten years.
• All credit information reported as a result of an application worth over $150,000 of credit or life insurance does not have a limit.
• Any unpaid judgments or lawsuits remain on a credit report for seven years or until the statute of limitations expires (whichever is longer).