A person who has taken out some form of credit, be it a loan or certain kinds of bills, even way in the past, will have a credit report. This credit report is a compendium of information related to the person's credit history. Credit reporting bureaus keep this information as a way of formulating a person's credit score, which is used by lenders to measure a person's creditworthiness.
Credit Reports
A credit report is formed from both public and private information. Creditors report information about current debts that individuals have taken out to credit reporting bureaus. These bureaus also comb public records for information about a person's financial status. This information is logged into a person's credit report, which provides a thumbnail sketch of his credit history. Information in this report is fodder for a person's credit score.
Credit Scores
A credit score is a number between 300 and 850 that measures -- in the opinion of the credit reporting bureau -- a person's creditworthiness, as calculated using the information contained in his credit report. This score is not public knowledge, but is only accessible to parties that have a legitimate business interest in knowing a person's credit score. Nearly everyone who has a credit report also has a credit score.
Uses
A credit score is primarily used by a lender to determine the likelihood of a person paying back a loan that is issued to him. This score helps the lender determine how risky it would be to loan a person money. In addition, scores can be used by landlords to make a guess as to whether a tenant will pay his rent on time and by employers to gauge a person's financial responsibility.
Effects
A high credit score can lead to a number of direct benefits to the score holder. Not only might an employer be more likely to hire a person with demonstrated financial responsibility and a landlord more likely to rent to him, but lenders will likely offer him lower interest rates on loans. For large loans, like mortgages, even a small difference in a credit score can translate to thousands of dollars in savings.
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