Credit Report: Facts And How to Improve It

A credit report is very essential. It determines an individual's credit worthiness. In this article. let us discuss tips on how to read your own credit report. Also, we will tackle the how you can fix your credit report and improve your credit scores.

Your credit report

Your credit report is divided in four parts and these are your personal identity section, your credit history, public records (if any), and the inquiries made by to your report. The first section obviously contains details about your personal identity while the other three sections contain information about you and your relationship with creditors, insurers, lenders, and employers.

Keep in mind that a credit history will reveal everything that concerns you and your creditors. This is where all your accounts, debts, unpaid charges, credit limit and payments are recorded. The next part of your report is the public records section where tax liens, bankruptcy, foreclosures, judgments and other legal remarks are reflected. An ideal credit report should have this section blank or empty as any remark contained here can affect your credit rating really badly.

The last part of your credit report is where all inquiries from potential creditors, insurers, employers and other companies are reflected. If you submitted a credit card application or a loan application, your prospective lender will be inquiring about your credit report and you can see it under this section. These inquiries are called "hard inquiries" and can very well affect your credit score. But inquiries that are initiated by companies who are interested in offering you credit are called "soft" inquiries and will not damage your credit score.

Your Credit Report Score

The system of calculation used by the three major credit bureaus and most companies is the FICO system. The FICO score ranges from a low of 300 to a high of 850. Each lender has different sets of qualification when it comes to considering a credit score. However, a credit score of 700-750 is usually considered as good while a score of 750-800, excellent. Obviously, with a higher credit score, you can bet on the approval of your application and demand for better rates or higher credit limit. A score of 650-700 can be considered fair and it would be up to the lender whether you'll be granted an approval or not.

A score of 600-650 is considered as bad and a score of 600 and below makes you a high-risk borrower. In such case, your only chance of getting approved is if you apply for a bad credit or a sub-prime credit card or loan.

Improving Your Credit Report Score

After reading your credit report and finding out about your credit score, you can now gauge your status to prospective creditors. If you're thinking about applying for a credit card or a home loan, reviewing your credit report is a must. What should you do if you find that your credit rating is low? Before submitting any application to any lender, an applicant is advised to first check his/her credit report and try to improve his/her credit score. This will prevent rejection of your application which can only worsen your current score. It's best to wait to wait at least six months and pay off your unpaid debts to your existing creditors. Keep up with your payments on time and you should see a progress in your score after a few months. By this time, you will be more prepared to take on a new account without fearing rejection.