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Credit Score Advice: Credit Score is an integral part of your finances

By Brian Anderson
Published: Wednesday, April 14th, 2010

These are times of economic hardship and one has to be very careful with finances. It will help one if they understood the basics of finances and how various decisions affect their finances. The most basic term in finances today would credit. Credit is a very important term that few rarely understand. Credit is when a person looking for an investment goes to a creditor or a lender. He can borrow money from the creditor with a promise to return the money in timely and periodic installments of fixed amounts.

The creditor will have top decide if he can give the loan or credit to the applicant. He will do this by requesting the credit report from an agency. There are three such agencies in the United States. They are Experian, Equifax and TransUnion. Each for these three agencies prepares up to date credit reports and the creditor can go to any one of these agencies. The credit report might be the most important document in your financial life. It has all the details a creditor or lender might ever need to take a decision regarding your credit. It has all your identification information including name, social security number, spouse’s name and even employer details.

The most important of a credit report would be the credit history. This section of the credit report will have every single credit you might have had listed. Along with each credit, details of payments will be listed. Late payments or over due amounts will also be listed. Charged off accounts will also be listed. Charged off accounts is the name given to accounts when a creditor has given up trying to collect payment. There is also a section for public records. This section lists any public records such as bankruptcy filings, tax liens etc. Most of the details on the credit report will stay on your report for seven years.

The best way to keep track of your finances is to order out credit reports regularly. A new federal law states that every citizen is entitled a free credit report from each of the three credit report agencies. You can go visit the site AnnualCreditReport.com to get your free credit report. It is a good idea to get your report from this site and not go to the agency directly. Going directly to the agency might cost you some money.

Credit score is another very important aspect of your finances. This score is your entire financial history reduced to a simple number. The agency which calculates these scores is known as FICO. This agency has a formula according to which it calculates the score. It gives different levels of importance to different areas of your credit report.

Payment history is responsible for thirty five percent of your score while amounts owed will account for thirty percent. Length of credit history will play a huge role and accounts for fifteen percent. Type of credits and new accounts will count for the least accounting for only ten percent. Credit scores will help one decide very easily whether a person is eligible for a credit or not.

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