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Credit 101



Can a person correct his or her own credit reports?

Of course. People can legally correct their own credit reports. However, most people can find this intimidating and time consuming. This is just couple of reasons why people choose to utilize the services of a company that can fix the errors on their credit report.


What is credit score?

A credit score is rating used by a lender to help determine whether you qualify for a particular credit card, loan, or service. Based on information in your credit file, the credit reporting company analyzes your information using a complex mathematical model to yield your credit score.

Most credit scores estimate the risk a company incurs by lending you money or providing a service – specifically, the likelihood that you’ll fail to make payments in the next tow to three years. The higher the score, the less risk you represent. Your score is calculated by mathematical equation many types of information found in the credit file.


Introduction to credit?

Credit is the reputation for repaying debts on time. The better your credit, the more willing companies and people will be to lend you money, issue you a credit card, rent a house or apartment, hire you, or provide services to you on a favorable terms.

The fundamentals of the credit reporting system come the three big credit bureaus: Trans-Union, Equifax and Experian, to your rights under the Fair Credit Reporting Act. Here is the link to the FCRA https://www.ffiec.gov/exam/InfoBase/documents/02-con-fair_credit_reporting_act-000799.pdf


The credit reporting agencies

Trans-Union, Equifax, and Experian are the three national credit reporting agencies that keep records on consumers. The reporting agencies work with lenders, creditors, insurers and employers to update and distribute your information to the appropriate institutions. Here’s an example of how the system works:

  1. When you apply for a new credit card the creditor requests a copy of your financial history from the reporting agencies. This causes a “hard inquiry” to be recorded on your credit report.

  2. The creditor uses your credit report and scores along with income and debt information to determine what rate to offer.

  3. You start to use the new credit card and the creditor reports your activities to the credit reporting agencies about every 30 days.

  4. The credit reporting agencies update your credit report as they receive new information from creditors or lenders.

  5. Your credit profile changes are based on your financial activity. The next time you apply for a credit card or loan, the process repeats.


Your Credit Report

Your credit report is divided into six main sections:

  • Consumer information (address, birthday, and employment)

  • Consumer statement

  • Account histories

  • Public Records

  • Inquires

  • Creditor contacts

When you open a new account, miss a payment or move, these sections are updated with new information. Old negative records will stay on your credit report for 7 years.

Positive records can remain on your credit report longer. Not all creditors report to all three agencies and the agencies obtain their data independently so your reports from Trans-Union, Equifax and Experian could be substantially different from each other.

It’s important to check your three credit reports every 6 to 12 months to ensure that the information is accurate and up to date.

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