Many consumers are confused when they either request a copy of their credit history, which they are entitled to do from each of the 3 major credit reporting agencies once per year, or when they get one when they request it after being turned down for a credit card or a loan. Credit reports are ultra concise and written in a coded format with lots of abbreviations and acronyms. A trained eye would quickly decipher the meaning, but the average consumer would be advised to search the internet for “how to read a credit report” for help.
It is always worthwhile to get copies of your credit reports from the three major credit reporting bureaus. Mistakes are common so do not feel like your stars are the only ones that got crossed. Your credit history may show you 90 days behind on a car loan you paid off last year when you traded the car for a newer model, and probably at the same car dealer. The tiniest, little glitch in a creditor’s data entry system is all it takes to word family wreck your credit rating. Obvious errors and oversights can often be corrected with a telephone call and a letter to the offending creditor.
The biggest surprise usually comes after you finally figure out how to decipher the coded narrative of your credit activity and start looking for your credit score. There is no scoring data anywhere to be found in a credit report. A credit score is a three digit analysis and summation of the information contained in a particular credit report. If you want your score you will have to order it separately, and pay for it.
Lenders and other creditors use your credit score to evaluate your creditworthiness. Scores range from 300-850 and can be looked at from the lender’s perspective as the probability that you will pay back the loan in full and on time. A FICO score above 750 gives the lender the warm fuzzy feeling that he is making a good loan. A credit score below 600 creates images in the lender’s head of a profit-smashing write-off for his company, and a nasty email from his manager asking what the heck he was thinking when he approved that subprime loan.
You will see all kinds of TV advertisements for free credit scores. Notwithstanding that these free credit score offers almost always require a credit card number, unless the offer explicitly states that you will be getting your FICO credit score, the scores you will get are, at best, estimates of your FICO score. Lenders use your real FICO credit score, and you should too.