Your credit score affects everything, from where you live to the kind of car you drive. What you do not know about information in your credit report can hurt you.

Your Credit Score

A credit score is a three-digit number that lenders use to predict how likely it is that you will make timely payments on your bills and other obligations. Your credit score can affect whether you are able to rent an apartment. It also can affect how much of a deposit you will have to pay to get your telephone and utilities turned on once you move in. Financial institutions use your score to determine:

- whether to give you a loan

- how much to loan you

- how much they should charge you for borrowing that money

Generally speaking, a higher credit score means that you are more likely to pay lower interest rates on new credit and that you are able to obtain a loan. Since your credit score affects so many aspects of your life, it is important to periodically check your credit report to make sure everything is accurate and to be aware of items that might be negatively impacting your credit score.

Lenders and other institutions purchase your credit score from three primary credit bureaus:

- Experian

- Equifax

- TransUnion

Credit scores generally range from 300 to 850, and most lenders consider scores above 700 to be a sign of good financial fitness. Scores below 600, however, indicate a higher risk to lenders. As a result, people with such scores often pay higher interest rates and sometimes are unable to obtain loans or credit.

For a fee, you can obtain your credit score through each individual credit bureau. You also can obtain your credit report through other sources like the Annual Credit Report Service, which allows you to obtain one free report per year from each credit reporting agency, and myFICO, the Web site for the Fair Isaac Corporation, which developed the standard credit scoring system (also known as the FICO score).

Your Credit Report

Aside from your name, address, Social Security number, employment history, and other basic information, you are also likely to find the following information in your credit report.

• Payment history. Your payment history generally accounts for about 35 percent of your credit score. Your payment history on credit cards, loans, mortgages, retail accounts, and other accounts all show up in your credit report. Other information can include:

- the amount past due on delinquent accounts

- how long accounts have been overdue

- how many overdue accounts are in your name

- adverse public records like bankruptcies, foreclosures, and liens

- the number of accounts you have paid as agreed and on time

• Balances. The amount you owe on your accounts typically accounts for about 30 percent of your credit score. Your credit report will include information about:

- how much you owe on open accounts

- the balances you owe on specific account types

- the number of accounts you have with balances

- the amount of credit you are using compared to the credit limits imposed on your accounts

- the amount of money you owe on any installment loans

• New credit. New credit typically accounts for about 10 percent of your overall credit score. Any time you apply for new credit, this information shows up in your report. Your report will include information about:

- how many accounts you have recently opened

- how long they have been open

- whether you have good credit history following any payment problems on your accounts

• Length of credit history. The length of your credit history usually accounts for about 15 percent of your credit score. Lenders and other institutions want to know how long you have had credit in your name. Your report will contain information about:

- how long your accounts have been open

- the amount of time specific types of accounts have been open

- the amount of time that has passed since any activity on those accounts

• Types of credit. The type of credit you use generally accounts for about 10 percent of your credit score. The kind of credit and the number of various types of accounts in your name is important information to a lender. As a result, your credit report is likely to include recent information about:

- the number of credit cards you have

- the number of retail accounts you have

- mortgages

- consumer finance accounts

- installment loans in your name

• Trade lines. This term refers to your credit accounts. In your report, each of your lenders supplies information about:

- each account you have with them

- when you opened the accounts

- the credit limit or loan amount

- the account balances

- payment history on each account

• Credit inquiries. Every time you apply for a loan or for credit, you are giving a financial institution or lender permission to access a copy of your credit report. Each time a lender inquires about your history, it shows up on your credit report. So, when you pull your credit report, you will be able to see who has requested your information and whether they accessed your report as a result of your request for credit or a loan or if they obtained it without your knowledge to extend a pre-approved credit offer.

Additional Resources

• myFico:                                                            http://www.myfico.com
• Federal Trade Commission                                http://www.ftc.gov
• Annual Credit Report                                         https://www.annualcreditreport.com/cra/index.jsp