What is a Credit Score?

A credit score is a simple number that ranges from 300 to 850. It represents someone’s creditworthiness, and it gives the lenders who see it enough information about how able you are to repay your loans.

The number is not at all arbitrary. People from the Credit Bureaus don’t just look at your credit report and pick a number that sounds good. Understanding how to check your credit score will make your life easier when you’ll need to apply for a loan.

A credit score is calculated based on several elements. Each of the five components which constitute the credit score has its’ own value based on importance.

  • Payment history: 35% of your credit score value
  • Amounts owed: 30%
  • Length of credit history: 15%
  • How many types of credit in use: 10%
  • Account inquiries: 10%

Why it's Important That You Check Your Credit Score Regularly

Many people look at their credit score regularly because it's so easy to do so these days. They check it based on the idea that the score is what counts, and they're not entirely wrong. However, many of them never look at how they got their credit score, which requires them to pull their credit report and find out what's in it.

Credit Score vs. Credit Report

To check your credit score, you’ll actually need to obtain your credit report. A credit report is a document that is issued by the credit bureaus and contains information about your credit history.

Everyone who has applied for a credit card or purchased a car or a home on credit at least once has its own financial file, which is called a credit report. Your credit report is a compendium of how you have handled credit in the past. That information is used by potential lenders and other creditors to assess how responsible you will be with credit in the future.

Ways to Get Your Credit Report

  • Get Your Free Credit Report Online

    You can order your free credit report online at AnnualCreditReport.com

  • Order a Credit Report By Phone

    You can call them toll-free at 1-877-322-8228 to get a copy mailed to you.

Where Can You Get a Credit Report From?

A credit report represents the person’s credit history drawn up by a credit bureau. Credit bureau assembles details of all past, and current credit accounts and its’ base develop credit reports. The reports are used for the assessment of your creditworthiness.

It’s not difficult to get a copy of your credit report. By law, you are entitled to at least one free credit report per year from any of the three leading credit reporting agencies:

  • Experian
  • TransUnion
  • Equifax

You are also entitled to obtain a copy of your report anytime you have been denied credit. As well as if you are in financial distress or if you believe your report may be inaccurate.

There are many banks, financial services companies, and other institutions who offer access to your credit score via a smartphone app these days. So, accessing your credit score is easier than ever these days. In most cases, accessing your credit score via an app does not count as an “account inquiry.” And it won’t affect your credit score. However, you might want to dig a little deeper than just that single number.

What Does a Credit Report Contain

It includes all the details, such as:

  • whether or not you have paid them on time or were delinquent
  • if the account is in default
  • whether your account was sent to a collection agency
  • existence of bankruptcies
  • presence of any foreclosures

What do Lenders Check on Your Credit Report

Lenders can and will legally request your credit report to assess how risky it would be to either lend money to you or give you a line of credit.

What a lender sees when they get your credit report is all of your past and current credit accounts.

The resultant credit score allows lenders to decide your level of risk. It will help with their decision as to whether or not they will lend you money. The probability of getting the money you need increase along with the number growth.

How to Handle an Error From Your Credit Report

It’s always a good idea to request your credit reports on a regular basis and conduct a careful review. It is not unusual to find errors in a credit report. There is often inaccurate or inconsistent information in there.

When you spot an error, you have a right to ask for the forms needed to dispute the incorrect items within 30 days from receipt of your report.

Your Credit Score is in Your Hands - Use Credit Responsibly!

It is vitally important to use credit responsibly.

A good credit score depends on a flawless credit history. It can spell the difference when it comes to buying a car, owning a home, or being able to borrow money to meet emergencies that sometimes crop up.

The bottom line in all of this is, the only way to make sure your credit report is accurate is to ask to see it. And the only way to increase your credit score is to make sure items are removed, either by paying a legitimate debt or removing items that shouldn’t be there. And you can’t know any of that information without obtaining your credit report. You might think you know which debts are lowering your credit score unless you take a look.

References and Sources

  1. “How Lenders View Your Credit” – https://www.experian.com/blogs/ask-experian/how-lenders-view-your-credit/

  2. “How to Check Your Credit Score” – https://www.wellsfargo.com/financial-education/credit-management/check-credit-score/

  3. “What Is Credit And Why Is it So Important?” – https://www.credit.com/credit-reports/how-credit-impacts-your-day-to-day-life/

  4. “World of Credit Reports” – http://balancetrack.org/worldofcreditreports/index.html