Credit Scores and Credit Reports Explained

Understanding Credit Scores and Credit Reports

A credit score is a number that tells institutions such as banks how creditworthy you are. For example, banks will look at your credit score when deciding whether or not they approve a loan and how much interest they will charge you.

The better your credit score, the more willing financial institutions will be to give you a loan and the lower the interest rates charged on your loan.

Credit scores aren’t used by banks only but also by lots of entities from insurance companies to landlords.

Credit scores are calculated based on information gathered from multiple sources but mainly based on your credit report, which is a record of your credit history.

A credit report contains information from lending institutions, debt collection agencies, and even the government. For example, if you’ve paid back previous loans on time, your credit report will reflect that.

The credit score is calculated through an algorithm that varies from country to country as well as from institution to institution. In the United States, your credit score is mostly calculated based on credit report information from the top three bureaus: Equifax, Experian and Trans Union.

These three agencies operate the website through which Americans can request up to three free credit reports per year, one from each bureau. The Fair and Accurate Credit Transactions Act gives citizens the right to receive that information free of charge.

Contact Mr. Mark Shayani of Pacific Attorney Group for credit and debt counseling. Mark is a professional and compassionate financial expert who will help you ease your financial stress and develop a plan for living a financially healthy life.