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Credit Report & Credit Score; Credit Repair, Debt Management > Credit Report > Understanding the Credit Report for a Better Credit Score

Understanding the Credit Report for a Better Credit Score

By Ruth Racey
Published: Monday, February 20th, 2012

Having a good credit report is synonymous to having a good credit score (or vice versa). Both prove to be beneficial especially during this time of the economy’s recession. A credible report and score will serve as the only “weapon” needed to survive these hard times. Loans will be needed more than usual; low interests rates will be appreciated more than ever. So what does a consumer need to know in order to have both? What are the contents of a credit report that might need improvements on the part of the consumer?

A credit report is basically what the name itself suggests – a report. It is a report which contains information that is detailed to the very core. It is also about consumers’ finances and credit history. In other words, it is a report based on how a person handles his money, his credibility and trustworthiness. This is important as this becomes the basis of credit companies whether to or not to grant a loan to an aspiring applicant.

There are 6 parts of a credit report. The first part is the information about the consumer (name, employer and birth date). Next is the consumer statement (a note from the consumer about his delayed payment, if any). Third will the history of the account (includes 7-year payment history). Fourth are the consumers’ public records (tax liens, bankruptcy etc). Inquiries made by the consumer himself or by future employers will also be fifth on the list. And lastly, the creditors contact information. This last part is of importance because it here where creditors can give testimonies about a consumer whether through by phone or the internet.

A credit score, on the other hand is an estimated measure of a credit risk through a calculating method. The factors which are used in the formula for the end result of the said score are mostly based on the credit report. These factors, which are found on the report are maxing of one’s’ credit card, cancelation of old accounts, 90-day delayed payments, and the absence of credit references which greatly affect a consumers score card and if there are more than one of the said factors found in the report that appears to be unfavorable, a consumer is but expected to have a low score card.

There are actually 2 way of calculating a consumers’ score. One of which is by the FICO (The Fair Isaac Scoring Method). This is vastly used by credit companies for a very long time already. Even the 3 major credit reporting companies (Equifax, Experian and TransUnion) consider this score to be most reliable. It has a score range of 300 (lowest possible) to 850 (highest possible).

But since consumers find it difficult to receive high scores using the FICO scoring method, an alternative, which is the Vantage Scoring Method, was then created by the 3 major credit reporting companies. This new scoring method was just launched last march 2006. But since it is still new to the credit world, some are still skeptic about it.

When we have a good grasp at our credit reports, an increase in our credit scores is abominable.

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