Your credit report is a compiled history of your accounts and payments across your credit products. This can include student loans, credit cards, car loans, mortgages, etc. In short, it’s your life in credit. Reports are maintained by three major agencies: Equifax, TransUnion, and Experian. Keep in mind that the three separate agencies collect their own data and form their own reports. So, information and mistakes can vary from one report to the next.
You can get a free copy of your credit reports every year to make sure there are no errors or misunderstandings that could cloud your reliability as a borrower. If there are, you’ll want to set the record straight.
The credit score is a number that helps lenders understand how well you’ve managed your credit obligations in the past. The most common credit score used is provided by the Fair Issac Corporation. This is known as a FICO Score. A FICO Score ranges from 300 on the low end to 850 on the high end.
Using a number to assess your credit worthiness is much easier for lenders to use than reading through three different reports and making their own judgments. Five key components determine what your score will be:
Payment History (35%) – It’s important to pay as much as you can and make sure you pay on time.
Amounts Owed (30%) – A debt to credit ratio reflects how much available credit you are using.
Length of Credit History (15%) – Understanding your track record with utilizing credit is important to lenders.
Credit Mix (10%) – Types of credit you have shows your responsibility across various accounts and products.
New Credit Accounts or Inquiries (10%) – How often you apply for credit and open new accounts can be telling.
If you have issues with your reports or a low score feel free to reach out to one of EcoCredit specialists.