Online Credit Report and Scores

Your credit reports can either be your biggest assets or your worst liabilities. A smart consumer thereby understands that keeping your credit reports in the best possible order is a wise move and a never ending ongoing process until you are alive.

In the U.S.A, credit reports are maintained by Equifax, Experian, and Trans Union. These three bureaus collect and compile all financial information about you independently and put them in credit reports.  As the bureaus do not exchange the information that they gather with each other, you must access them on a regularly basis and compare reports from each of these bureaus to ensure that there are no errors in these reports. Your online credit report is your financial resume and hence it is your responsibility to ensure that it is an accurate reflection of your financial standing.

The credit bureaus maintain your credit reports that contain your credit history as well as current financial situation. Lenders and creditors analyze reports to determine your creditworthiness. The amount of credit that is offered to you and the interest rates that will be charged are determined based on this analysis. To ensure that your financial transcations has been reported correctly and is viewed as such by the creditors, access your online credit reports and review them. If you find any credit errors, initiate a dispute with the bureau to get them rectified. You can detect these errors when you check your credit reports from each of the three bureaus regularly.

Your online credit report contains information that is used to calculate credit score. Credit report score is a 3-digit number that is calculated using the information available in your credit report. The calculation is done using a mathematical formula that includes components of your credit history like the length of your credit, type of credit, status of your debts, inquiries, credit balances and debt to credit ratio. Given below are the factors and the percentages considered when calculating credit score.

1. Payment History – 35%
2. Outstanding Debts – 30%
3. Credit history length – 15%
4. Types of Loans (installment or revolving loans et al) – 10%
5. New Credit – 10%

Your credit score changes with change in the above factors such as your card balances. Therefore, it can be safely said that your credit score is a reflection of your current financial sitaution at a glance. As each of the three bureaus work independently, they have their own scoring system and the scores vary from one bureau to another.

Credit scores are an indication of how credible you are and what are your chances of repaying the loan. The method of calculation of score and its relation to your creditworthiness has been arrived after extensive study done by the bureaus. It was observed that there is a direct relation between your scores and the way you discharge your credit obligations. A consumer with a higher score is less likely to default on the installment than a consumer with a low score.

Credit scores range from 300 to 850, with most consumers having an average score of 700. When you have a better understanding of the factors in your credit report that affect your credit scores, you can manage your report better and ensure that you are eligible for better loans at low rates of interest.

Lenders take into consideration your credit score as well as a thorough analysis of the transactions in your credit report to determine your reliability for the approval of any loan or mortgage applications applied by you. If your score meets the minimum standard set by the lender, your application is processed further.

It is essential to protect your creditworthiness by periodically reviewing your credit reports online. Ensure that the information provided by the bureaus is accurate and if you find errors, initiate a dispute with the concerned bureau to get it corrected.

Consider the option of credit monitoring for periodical or monthly monitoring of your credit to ensure its security. You can prevent frauds and Identity theft by opting for a credit monitoring service.

Obtain your online credit reports and be sure to review them before applying for loans.