What exactly is a Credit Score? (part 1)

It is nothing new, that a report of your credit is ordered when applying for a loan.  But in recent years, your credit standings are used to determine so much more, like how much you will pay for auto and home owners insurance.  Your credit can also be used by potential employers as a criterion for offering you a job.  That 3 digit number wields a great deal of power these days.  So just how is that number determined?  Maybe more important is how can you control it?

The next few posts will touch of some of these questions to help you understand, what a credit score is, how it is determined, how to build a good credit score, and how to repair a low score.

Part 1 – What goes into a credit score?

Your credit score will include four types of information: public record, credit, credit inquiries and personal.  Information of public record are pieces reported by the judicial system.  It may include judgments, foreclosures, bankruptcies, tax liens, or overdue child support.  Depending on what type of information is disclosed on your report, the data could stay there for 7-15 years.

Credit information is data relating to specific accounts you have or have had in the past.  For each account the date opened, credit limit (or original loan amount), balance, payment amount and payment history will be listed.  Your report will also detail those accounts you are a co-borrower on.  Negative information can remain for up to 7 years from the date it was last reported.  Fortunately positive information can remain indefinitely.

Requests by other creditors to review your credit history will also be listed on your report along with the date requested.  This information is visible to anyone else who may request your credit.  Information for the purpose of extending pre-approved credit offers are only revealed to you and do not impact your overall credit score. 

Personal information includes your name, address, phone number, social security number, date of birth, employer and sometimes your job title.  The report will include both current and past information.

Knowing this, it is easy to see why your credit report is so important to understand and monitor.  The next post will touch on what goes into determining your actual score.

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2 Responses to “What exactly is a Credit Score? (part 1)”

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