Guide to Improving Credit Score and Credit Report

Knowing how to look up your credit report and credit score are crucial to your financial life. Frequently checking your report can help you maintain your credit score and assist you in finding early signs of identity theft. 

There is a vast amount of information on credit reports about the finances and debts of a borrower. Potential lenders, employers and landlords are some of people who can view your credit information. Receiving a better understanding of the credit information on the report and how the report can impact your score and can help you improve your score.

The Purpose of a Credit Report

This type of financial information is a record of debts and funds that provides a numerical representation of how you manage your finances and if you are likely to repay a loan on a timely basis. This number is commonly known as a credit score. A high credit score provides several advantages in your finances. A low score can negatively impact on your financial life and make it a challenge for you to receive a loan, get hired for a job or obtain an apartment.

Who Will Look at Your Credit Report 

Whenever you apply for any loan or line of credit, your credit report will be looked at. When you open specific accounts like signing a cellphone contract or getting certain home services like a landline phone or cable.

Aside from lenders, employers have begun checking the credit of potential hires during the application process. Landlords also consistently check the credit score of potential tenants and examine your credit history for derogatory marks, like collections or untimely payments.

What is on your credit report?

What your credit report may include is basic personal information such as your name, home address and employer. In addition, your credit report will have detailed tracking of your finances and debt history like:

  • Auto financing loans.
  • Mortgage loans.
  • Student loans.
  • Credit cards.
  • Personal loans.

Your credit report will always include the kind of loan your debt is and will also display the credit limit, credit balance, the original amount on the loan and payment history. Any late payments, any missed payments or defaulting on any debt can show up on your credit report. Furthermore, public records will appear as well like:

  • Repossessions
  • Foreclosures
  • Bankruptcies
  • Tax liens

This financial report on your debt and credit will provide the length of time the loan has stayed open. But when a loan is paid off or closed, the account will no longer serve you in the way it did before.  

How Your Credit Information is Kept Track Of

There are three credit bureaus within the United States and they are called TransUnion, Experian and Equifax. When you decide to negotiate with a specific lender, the lender will provide your credit information to at least one of the credit bureaus. They will also provide them with your personal information in addition to the finances for the entirety of your loan or account.

The majority of accounts will report to a minimum of one bureau every month. These monthly reports will many important details such as the debt amount, original amount on the loan and payment history. It is possible that a late payment will be reported despite the late fee being waived or some other arrangement was done to the account. 

Daily Life and Your Credit Report

Your credit score shows lenders how well you can manage your finances. Your credit report and score is a major determining factor for being eligible for a loan, adjusting the terms on loans in your favor and more. Employment opportunities or being able to rent an apartment can be affected by your credit score.

Obtaining Your Credit Report

There are many ways for you to obtain a copy of your report. This includes buying your report from one of the previously mentioned credit bureaus. One important detail to note is that you are entitled to a free report, one from each, every 12 months. 

Other reputable companies can provide access to a credit report. Often, these companies will provide the reports for little to no cost. In addition to letting you check your credit score and report, the websites have added features like email alerts or reminders to check your reports frequently. 

Avoiding Too Many Credit Inquiries

Inquiries occur when a lender runs a credit check to examine your credit history and credit score to decide whether you are risk to borrow for them. Credit inquiries can impact your credit score and report, although minimally. Luckily, the inquiries can be removed from the credit report after some months. 

To continue, several inquiries done within a 30-day period do not typically keep impacting your credit within the first month. This can ensure that you can examine multiple lenders to find the best loan available. You can also examine your credit score and credit report as often as you want, and it will not influence your credit report.

Improving Your Credit Score

Credit reports show you where you are negatively impacting your score the most, which allows you to take the first steps to repairing it. Depending on the circumstance, you can find the impact in places such as the number of credit card accounts you have open, how you have used your credit card and payment history. 

If you use your credit card too often, then your credit score may lower. The total amount of debt you have is compared to the total available credit on your open accounts as well as the specific debt-to-credit ratio for each account. For instance, if you have a credit card with a $1,000 limit and your current balance is $200, then you have used 20 percent of the credit card limit. When your credit usage is lower, then your credit score will be lower.

If your payment history is poor, then making payments on time on your following payments for all accounts can be the first step forward in improving your score. Furthermore, it is crucial to take care of accounts that are delinquent or defaulted. 

Getting and using a credit card can help you build and repair your score, but you must make timely payments and avoid having high balances. A secured card can be an option if you are not eligible for a credit card. The deposit you place when you open your account will become your line of credit.  You must remember that a poor credit score will not change overnight. Repairing your credit score can take months or even years, so patience is key.