Whether you are a millennial just starting to think of possibly applying for a loan, or if you are a baby boomer getting ready to refinance your 3rd house, its always good to keep track of what is going on with your credit and your credit score. Here are some quick highlights as to why it is so important and how you can monitor one of your most important assets.
Credit Report PurposeProvides history of your credit use to prospective lenders
Allows lenders to assess risk of extending credit to you
Used for all forms of credit, including apartment rental, credit cards, student loans, car & home loans, etc.
Establishing CreditApply for credit card with a reasonable limit
Buy something for approx. $100, and pay back in 2 months
Do it again, and make sure to pay on time!
4 trade lines will be needed to obtain a mortgage
12 months of activity are needed to develop credit history
What information is Included in a Credit Report?Personal Info: name, address, date of birth, employer
Credit Account History: credit card company/lender, type of account, credit limit, balance, payment history
Public Records: bankruptcy, tax liens, and judgements
Credit Inquiries: creditor and date of inquiry
What is a Credit Score?
Summary of credit report info represented as a single number, based on a mathematical calculationFICO (Fair, Isaac, & Co.) most common score type
FICO scores range from 300 - 850; the higher the better
Predict future payment history for creditors
Scores are "fluid" - recalculated each inquiry
Credit Score FactorsPayment History: 35%
Amount Owned: 30%
Length of Credit History: 15%
New Credit: 10%
Type of Credit Used: 10%
Getting Credit Reports
There are 3 credit bureaus and each has a credit score for you (scores may be different)