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What is a Credit Score?
A credit score is a term used to refer to credit bureau risk scores. It
broadly refers to a number generated by a statistical model, which is used to objectively
evaluate information that pertains to making a credit decision. Your credit card
history; amount of outstanding debt; the type of credit you use; negative information
such as bankruptcies or late payments; collection accounts and judgments; too little
credit history and too many credit lines with the maximum amount borrowed are all
included in credit-scoring models to determine your credit score. The most widely
used credit score is called FICO for Fair Issac Co., which developed it.
Understanding Your Credit Report
To have a complete picture of your credit history, it is important to get a credit
report from all three reporting agencies. Since credit reporting is a voluntary
system, and creditors may subscribe to only one agency, it is best not to assume
the information will be the same on all three reports.
A credit report is basically divided into four sections: identifying
information, credit history, public records and inquiries.
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Identifying Information: This information identifies you. Review this information
to ensure it is accurate. Any variations will stay on your credit report and could complicate loan applications. Other information might include your current and previous
addresses, your date of birth, telephone numbers, driver's license number, your employer and your spouse's name.
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Credit History: Each account will include the name of the creditor and the account
number, which may be scrambled for security purposes. You may have more than one account from a creditor. Many creditors have more than one kind of account, or if
you move, they transfer your account to a new location and assign a new number. The entry will also include:
- When you opened the account
- The kind of credit (installment, such as a mortgage or car loan, or revolving, such as a department store credit card
- Whether the account is in your name alone or with another person
- Total amount of the loan, high credit limit or highest balance on the card
- How much you still owe
- Fixed monthly payments or minimum monthly amount
- Status of the account (open, inactive, closed, paid, etc.)
- How well you've paid the account
Once you review your credit reports, any mistakes should be reported to the reporting agency.
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