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Your Credit Report – Why is it so Important?

If you are applying for a loan, a mortgage or a credit card then your credit score will play a major role. Your Credit score will help the lender decide if you are a suitable candidate for a loan, set your interest rates and your terms of repayment. The healthier your credit score is then the better terms and interest rates you can get from the lender as you will considered a lower risk.

So what’s it all about?

The Credit Bureau – A credit bureau (such as Experian) collect consumer information from banks and other financial institutions. They then store this information and provide it to banks and other companies to help them determine the risk a consumer may pose on any credit they apply for.

Credit reports – Credit reports contain information like your name, address, employer, phone number, credit and loan accounts, payment records, collection accounts, as well as public records such as bankruptcies and court judgments. Credit reports also contain a history of when your credit was checked, either for a credit application (hard inquiry) or an account review (soft inquiry). Credit reports are constantly updated with new information and most banks voluntarily report any new customer information every 30 days.

Credit scores – A credit score is all of those complex details broken down to produce a 3 digit number. This is then used by the banks and other financial institutions to predict how risky a consumer is. Most credit scores use a range from 300-850 and are designed to predict how likely you are to be 90 days late on an account in the next year.

Credit issues – Late payments, high credit card debt, numerous applications for loans or a young credit history can all affect your credit rating. Any records such as collection accounts, files for bankruptcy and court judgments are also very damaging to your credit score. Repayments for collection accounts unfortunately do not remove the record from your credit report.

Checking your Credit Report – Checking your own credit report does not harm your credit score as it is not considered a hard inquiry (such as a loan application). The common thought is that credit reports should be reviewed every 3-6 months for any issues or errors. If any errors are found, then you can file a dispute with the credit bureau to have your record examined.

In a Nutshell

Your credit report and credit score are very important as they can have a significant impact on your life. That’s exactly why it’s crucial to check your credit report regularly.

Another reason why regular credit checks are important is identity theft. Millions of people fall victims to identity fraud and by the time they find out it is usually too late. So, by regularly checking your reports you will be able to identify anything suspicious and take care of it immediately.

If you are applying for a loan, a mortgage or a credit card then your credit score will play a major role. Your Credit score will help the lender decide if you are a suitable candidate for a loan, set your interest rates and your terms of repayment. The healthier your credit score is then the better terms and interest rates you can get from the lender as you will considered a lower risk.

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2 Comments

  1. Lesli Says :
    Posted on June 22, 2015 at 5:44 pm

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    Posted on June 25, 2015 at 5:28 am

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