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Credit Scores and Free Credit Report |
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Credit scores and free credit reports are the two major things that signify your credit condition. Your credit risk level is reflected in your credit score. If your credit score is higher, your risk is lower. Credit scores are generated from your free credit report using statistical models and information. But a person's credit score is not stored on his/her credit file along with the free credit report. It is produced on the lender's demand. When a lender asks for your free credit report, the credit score that is thus generated is sent along. Credit scores and free credit reports are closely related. Your credit scores never remain constant. They change as the things on your free credit report change. Besides, your credit score may rise or fall in accordance with your payment updates or a new account. Your credit score may vary from lender to lender because all of them don't use the same statistical model to count your score. In fact, your free credit report plays a vital role in determining your credit score. It determines whether you are eligible for the credit or not. In the process of approving you for a credit, lenders collect your credit experiences, use a statistical program, compare you with the other customers and then assign you a score. This score determines whether a company would offer you the credit or not. The higher your credit score, the lower the interest you would get on auto loans, credit card interest rates, mortgages, and so on. To determine your credit score, lenders use the breakdown model. The breakdown shows that 35% of the score is based on your payment history, 30% on the outstanding debts, 15% on the length of the time you've had the credit, 10% on the number of inquiries on your free credit report, and 10% on the types of credit you currently have. Earlier, a lender had to go through each of your free credit reports and decide whether he would give you the loan. If you had multiple debts, he might have simply denied you a credit. Therefore, keeping your benefit in mind, the concept of credit scores was devised. Credit scores are objective and successfully remove the risk entailed by bias and human error. The importance of credit scores is increasing day by day. For instance, if you want to buy a new car, you should be up-to-date with your credit score. Most car dealers would like to know what your credit score is. If your credit score is good, you can easily get financed for a new car. If you want to get your credit cards, then too, your credit score plays a vital role. Unless you are able to produce a good credit score before the credit card issuing company, you could be rejected right away. And if you are able to get a credit card because of your scintillating credit score, don't forget to pay all your bills on time. If you fall behind on your payments, it may badly affect your free credit report and your credit score. Late payments are one of the major damaging factors as far as your free credit report and credit score are concerned. The longer you take to pay off your bills, the more your credit score would be affected. The amount of credit you've used against the total credit available also affects your free credit report and rating. Negative information like bankruptcies, charge-offs, and collections affect your score as well. Therefore, all consumers should request a credit report from any of the major agencies at least once a year, and update or correct all the inaccuracies, errors, and other problems. America has the most efficient and consumer friendly measures against incorrect reporting. It also has carefully enforced laws against any improper use of the credit bureau report. Besides, a number of free credit report services are coming up in the next two to three months. While Midwesterners will be entitled to their reports beginning March 1, 2005, consumers in the Southern states will have their free reports available on June 1, 2005. |
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