RE Credit Fix, LLC | Chandler Credit Consulting

What Makes Up Your Credit Report

Your name
Your Social Security number
Your current address and address history
Your current and past loan information
Your public record information (court judgments, bankruptcies, liens)
A list of other companies who have reviewed your credit.
Your 3 digit credit score (optional)

While some of this information is self explanatory, some of the other aspects -especially your credit score- are a bit of a mystery to most consumers. Few people know their credit score or understand how it is calculated. Additionally, most people are unclear about how their financial habits and behaviors impact their credit scores.

The majority of people understand or can at least apply simple logic to figure out the basics of credit scoring. For example, it is reasonable to assume that failing to make a payment will cause a decrease in your credit score. There are however, a number of complexities that trip up the average consumer. If you pay your debts on time, don’t carry too much debt on any one card, don’t close older accounts unless absolutely necessary and only apply for new credit when you have to, you will generally be in good shape. However, it is important to keep yourself informed so you can maintain a credit score that accurately reflects your consumer credit status.

Your credit score is determined by an algorithm developed by the Fair Issue Corporation (hence its name FICO). Since its inception, three corporations, called “credit bureaus” specialize in collecting and reporting on consumer credit specific to financial histories. The three companies are Equifax, Experian and TransUnion. While, the exact formula used to calculate your credit score is a tightly guarded industry secret, these companies provide general guidelines about financial behavior that can affect your credit score. When calculating your score, the basic formula includes:

35 percent: Payment history.
30 percent: Utilization ratio of credit card debt.
15 percent: Average age of your credit file.
10 percent: How often you apply for new credit.
10 percent: Mix use of credit such as mortgages, auto loans, credit cards, etc.

Lenders use your credit report in order to judge your reliability as a loan candidate. Your credit report indicates your ability to handle debt responsibly and will help banks decide if you are a desirable loan customer. A high credit score can help you lock in low APR rates or secure special deals on loans. A bad credit report may prevent you from securing loans and can damage your ability to buy a car, open a credit card, rent or purchase home. A history of inability to manage your credit successfully will make lenders uncomfortable about trusting you with additional funds in the future.

Once a year, you are entitled to a free copy of your credit report which is an offer you should take full advantage of. When you do receive your credit report, check to ensure the figures are accurate and act quickly to correct any mistakes. This may include any clerical errors, identity theft issues or incorrect information. If your information is all correct yet your score is lower than expected, you should begin working on an appropriate credit and/or financial rehabilitation plan to get you back on track.