Your credit is one of your most valuable assets and achieving good credit is an important part of responsibly managing your credit. To understand your credit score, you should first have a grasp of how credit scores are compiled and maintained. In the United States, three major companies compile and maintain credit reports. Each gathers information from companies that you do credit business with. For example, if you finance a car, the company that holds that note will report each time you make a payment, whether that payment is on time and note your overall performance on making payments.
That information is available to anyone with a legitimate business reason for asking for the file – including you, the consumer. But why would you want to see your report? Because there are many steps involved with the credit reporting process and any of those steps could contain errors. That means that your credit report could easily have mistakes that could damage your ability to get credit. The majority of the information is the same from each of the reporting agencies but there could be some differences, so it’s important to check each of your credit reports at least once a year.
How do I get a copy of my credit report? It’s actually easy to get a copy of your credit report. You can apply through any agency that provides credit reports to businesses. Some charge a fee but a federal mandate calls for each consumer to be given one free credit report each year.
Your credit report will have a list of all transactions that relate to your credit, including payment histories and applications for credit. You will also be given an overall score that many businesses use to determine whether you are credit worthy. Many creditors simply decide that anyone below a particular score is denied credit while scores above that number are approved. Others use the overall report, considering monthly payments already due, income and number of credit applications over the past six months.
To improve your credit score, always make payments on time. Be sure that past accounts are settled promptly and keep careful track of credit card charges so that you can make those payments on time as well. Remember that paying off a past due account will not remove the negative marks from your credit score – most transactions stay on your report for at least seven years. Only time and positive payment practices will improve your score.
