Understanding A Credit Score Report

What are credit scores? Understanding your credit score report is not always easy if you've never looked at your credit score before. Based on numbers alone, credit scores range from 300, which is the lowest score, to 850, which is the highest score. The national average is around 732. To qualify for the best loan rates, lenders usually require that you have a 750 rating credit score. Once you have your scores in hand, you'll also notice there is a wealth of other information regarding your debts. No fax payday loans do not require credit scoring.

To get your credit score report, you'll need to contact the three major financial information collectors: Experian, TransUnion and Equifax. Financial advisers recommend that you apply for one of each, since the reporting procedures and information sharing may be inconsistent. Lenders are only responsible for reporting to one of the three, so it's possible for there to be slight variations. Thanks to a new federal law, you're entitled to one free credit report online each year.  "People tend to pull one credit score report and think everything is the same on all of them. That's not normally the case," says Howard Dvorkin, president of Consolidated Credit Counseling Services. He recommends reviewing credit reports from TransUnion, Equifax and Experian for the most accurate reading. It's important that you review these files to ensure that all activity is correct. If you're looking at your credit score and scratching your head, then read on for credit scores explained.

A standard credit score report is divided into four sections: identifying information, credit history, public records and inquiries. Identifying information is just the basics, such as name, address and social security number. Look over this information to ensure it's accurate because it is not unusual for there to be multiple spellings of your name or more than one Social Security Number. Your report may also include your date of birth, previous residences, driver's license number, your employer and your spouse's name. Don't worry about this information too much, as it's all confidential and security-protected.

The main section to look at in your credit scores report is your "Credit History" or "Trade Lines." Your accounts will fall into 1 of 5 categories: Real Estate (first and second mortgage), Installment (car loan, regular payments), Revolving (credit cards), Collection (seriously past due) and Other. Each account will list the creditor/lender's name and the account number. Sometimes, more than one account will be indicated on your report from the same creditor, especially if it gets sold off into collection, but only one account should be marked "open" at a time. You should be able to see when you first started the account, the type of account, the total amount owed, how much you still owe, the status of the account (open, inactive, closed, paid) and how well you've paid the account. If it's noted "charged off," that means the credit made efforts to collect but gave up. If you see a code like "R1," then this generally indicates how well you've been at paying on a scale of 1 to 9. If you have had any late payments on your account, then you'll see a little square with 30, 60, 90 or 120 in the box, indicating how late you were. If you see a green OK and a 0, you're in good shape with high scores. If you see "charged off," "bad debt" or "placed in collections," then your account went 120 - 180 days past due and was sold off to debt collectors. Charge-offs and Debt Collections are bad since these poor credit scores remain on your report for seven years.

The next section is the real killer of the credit score report and the part you hope will be blank. It is the public records section. Here you may see a bankruptcy credit report, court judgments, tax liens, divorces, wage garnishment, civil actions, foreclosures and other legal matters that may affect your good credit scores. This section will be on your record for ten years and are the most serious offenses for your credit score. In some cases, these infractions can hack off 300 points from your healthy credit score! So, needless to say, you'll want to make sure you don't get embroiled in legal trouble involving your finances.

The final section of your credit score report lists third-party inquiries made into your credit scores. "Hard inquiries" are ones you initiate when you fill out a credit application or apply for a no telecheck paperless payday loans, while "soft inquiries" are from companies that want to market to you or collect a debt from you. Having a large number of inquiries can start to hurt your good credit scores if you're applying for new lines of credit every few weeks or if there are two or more hard inquiries in the same 14-week period. Of course, inquiries only take away maybe 20 points here and there, so it's not the biggest concern for you, unless you have otherwise perfect credit.

If you find a mysterious account or an incorrect amount owing on your credit score report, then you can fill out an online form to dispute the claim. The most recent estimate indicates that as many as 80% of all reports have some kind of misinformation. Financial advisers recommend that you keep up with your credit score and check up on it at least once a year to ensure accuracy. Now that you understand some of the sections and terms, you'll be better prepared.

Charge-offs on your credit score report will be the 1 reason you are denied credit. Often, in order to qualify for new loans, you'll be required to pay any unpaid charge-offs. Once you pay the full or partial amount, it will be noted "paid charge-off." This will remain on your credit for seven years and 180 days from the date of your first nonpayment. You can hire legal advisors who may be able to get charge-offs taken off your accounts. A company like Lexington Law Firm (www.Lexington Law.com) specializes in legally disputing and removing paid charge-offs to help you improve credit scores, which might be a good bet if you're planning to buy a house or make a big financial investment.

To improve your credit score report, you should first pay off all "Collection Accounts," asking for a letter of deletion that will erase all negative information from your credit score if you settle the debt in full. If you have a "Past Due Amount," then be sure to pay that creditor right away, as this is a damaging clause to have on your file. Next, get rid of your "Charge-offs" and "Liens." Paying a charge-off that is more than 24 months old will neither hurt nor help your credit but should be done as a matter of principle. Lastly, negotiate with your creditors to remove your "Late Payments" by asking for a good faith adjustment. Persistence and politeness can work wonders when it comes to improving credit scores.

Another way of getting your credit score up is to get a no credit check catalog credit account, then you can get some payments in your history without getting turned down.

Taking care of the negatives on your credit score report is only one step of the credit repair process. You must also think about improving credit scores through positive action that can act as a counter-balance to all the bad news on your report. Perhaps you can get a secured credit card, which functions like a debit card, allowing you to borrow from yourself, while reporting your repayment on your credit score. Once you pay your monthly bills in a timely fashion, then your score will gradually start to look better.