Getting your credit score and credit report is like having a health check-up for your financial well-being.
Just as regular visits to the doctor help you monitor your physical health, keeping tabs on your credit score allows you to assess the health of your financial profile. And just as a medical check-up reveals potential issues or areas for improvement for you physically, your credit history provides insight into your financial habits, debts, and repayment history.
Now that we’ve established the importance of your credit score and credit report, what else should you know? Let’s take a look at the most frequently asked questions about credit scores and credit reports.
There are multiple credit score models used by lenders to determine creditworthiness. The FICO Score is used by 90 percent of leading lenders and is the global standard for measuring credit risk. A FICO score is calculated by five factors:
- Payment history 35%
- Amounts owed 30%
- Length of credit history 15%
- Types of credit 10%
- New credit 10%
This information is obtained from each of the three credit bureaus: Experian, Equifax, and TransUnion. Credit report information from each bureau as well as how that information is weighted differs between scoring models and is the reason scores can vary significantly. Some scoring models are used for educational purposes only and are not used by lenders.
- FICO – The FICO score is the original credit score and was created by the Fair Isaac Corporation. Ninety of the top 100 largest U.S. financial institutions use FICO scores to make consumer credit decisions. FICO Score range: 300 – 850
- VantageScore – VantageScore was created in 2006 by the three major bureaus (Equifax, Experian and TransUnion) and controls 5-10 percent of the credit scoring market. VantageScore range: 300 – 850
- Equifax Credit Score – This is Equifax’s proprietary credit scoring model and can be used to calculate scores for all three major bureaus. Equifax Credit Score range: 280 – 850
- PLUS Score – The PLUS Score was created by Experian and is for consumer educational purposes to help understand creditworthiness. It is not used by lenders. PLUS Score range: 330 – 830
- TransRisk – This is TransUnion’s credit scoring model and can be used to calculate scores for all three major bureaus. TransRisk score range: 300 – 850
- CreditXpert – Created by Neuristics Inc., CreditXpert educational scores are sold through partnerships with companies that provide credit monitoring services. CreditXpert score range: 350 – 850
Understand that the scores you receive may not be the same scores a lender sees. This is dependent on the credit scoring model and bureaus the lender pulls information from and the type of loan or credit being applied for. Lenders also look at factors that are not contained in credit reports when determining creditworthiness, such as income and length of time at your present employer.
It is important to check credit reports regularly to monitor for any fraud or errors that could be negatively affecting your credit score.
You are allowed one free credit report annually from each of the three credit bureaus — Experian, Equifax, and TransUnion — by federal law under the Fair Credit Reporting Act (FCRA). These can be acquired at AnnualCreditReport.com.
A credit reporting company cannot charge more than $12 for a credit report. The prices listed in these charts from websites greater than $12 are offering services and/or scores that are not included with a single credit report.
Credit reports are broken into four sections: personal information, public record information, credit history, and adverse accounts (negative marks).
- Personal information contains your name, social security number, date of birth, current and previous addresses, your spouse’s name, and your employment data.
- Public record information contains any legal occurrences pertaining to your financial situation, such as bankruptcies, liens, wage garnishments or judgements.
- Credit history includes your lines of credit (mortgage, auto loans, credit cards, etc.), credit limits and account balances, monthly payment information, and status of the accounts (open, closed, paid, inactive, etc.).
- Adverse accounts are any debts that were paid late, have an outstanding balance, or sent to a collection agency and reported to the credit bureau(s).
These accounts will remain on your credit report for seven years. Items in this category can be disputed and removed by any of the three credit bureaus.
Many websites offer credit report summaries, which is not a full credit report. A benefit of summaries is an easy-to-read format that can still provide the primary information contained in a report.
A summary can give you enough information to regularly monitor credit with advice on how to improve your scores, but it is advised to receive a full report from each bureau at least once annually.
Our experts update this “Best Credit Report Services” guide often, so be sure to check back as ratings and rankings change. We also strive to keep our extensive list of FAQs updated to reflect the latest changes in the world of personal finance:
- 1. How Is My Credit Score Determined?
- 2. What Are the Different Types of Credit Scores?
- 3. How Do I Obtain a Credit Report?
- 4. What Does a Credit Report Show?
- 5. What is a Credit Report Summary?
If you’re still unsure where to begin on your financial journey, check out our latest guides authored by our team of finance experts. The more you learn about your options, the brighter your financial future can be.