If you want to take out a mortgage, car, personal or business loan, you need to know the basics of credit reports and credit scores. Lenders today look at your credit score when determining whether to loan you money. They also look at it to determine the interest rates they will charge you. Knowing credit report basics can help you boost your credit score and qualify for the best interest rates when borrowing money.
Three Credit Bureaus
Three credit bureaus--TransUnion, Experian and Equifax--compile credit reports on you. These reports detail the way you handle your money. If you miss a credit-card payment, it will show up on your credit reports. If you file bankruptcy, that will show up too.
Credit Score
Your credit score is created from the information in your three credit reports. Lenders look at this score when determining whether you are too risky to qualify for a loan. According to Fair Isaac Corp., the company that invented the credit score, a score under 620 is considered risky by lenders.
Top Scores
Borrowers with credit scores of 720 or higher will qualify for the best interest rates, according to the Fair Isaac Corp. This can result in significantly lower monthly loan payments.
Obtaining Your Credit Report
You can see copies of your three credit reports for free. Logon to the online home of AnnualCreditReport.com. Once here, you can order one free report from each of the three credit bureaus every 12 months.
Don't Fall For Scams
Don't listen to any company that tells you it's possible to boost your credit scores overnight. You can only raise your credit scores by changing the information on your credit reports. Pay your bills on time. Cut your revolving debt. Close unused credit-card accounts. There are no quick fixes for low credit scores.
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