Credit Reports/Credit Scores will Either Hurt you or Help You

But from all we have seen in the media pointing us to the nearest web site to obtain a report—what is it really? For one, a credit report is not free. I know because I have tried to obtain my credit report countless times and every time the site says this is “free” then asks for my credit card information and that’s when I point my browser to home and say forget it. I’m not paying for my credit report. I’ll know whether or not my score is good or bad the next time I go to make a major purchase and the vendor pulls up my report and looks at me and either smiles or frowns—then I’ll know—until then—who cares—probably I should the next time I need to access some credit.

So why all the fuss about credit reports and credit scores—here are some facts that may better explain all the media attention:

Your credit score is based on your credit report. Your credit report is basically a window into how you pay your debt, including monthly bills—if you were ever late, if you were ever referred to a collection agency to collect a debt, what kind of credit you use such as credit cards, and basically all of your banking information.

Your credit score, based on the information from your credit report, is a number ranging from 300 to 900 that lets a prospective lender know what kind of person you are when it comes to repaying your bills. Of course the lower the number the worse the credit score, so if you still want to purchase that beautiful shiny new car, you may be paying it off monthly at a lot more than if your credit score was higher, near the 900 mark. That is the reward for the consumer who pays his or her bills on time and who has managed to keep debt well within his or her financial means. There is a lot to be said about the old adage, “Live within your means.” Credit card debt and late payments will kill a credit report/score. And nowadays no one can afford that mess.

Your calculated FICO score used to determine your credit score is the industry standard when compiling your credit report. The credit score is calculated using several factors: 1) payment history; 2) debt owed; 3) credit history and how long you have had credit; 4) any new credit; 5) and types of credit used.

As you may have surmised your credit score is used to determine credit card applications, auto and home loans, and may even be used by a potential employer. Your resume may wind up in the garbage if your credit score is low because in a way that lets the employer know that you are not the responsible individual he or she was hoping for to handle the new position.