Credit is an important factor that affects one’s ability to secure a loan, job, housing and more. Credit collects over time, providing an overview of how you managed your money and bills in the past, which helps lenders determine whether they can work with you and what to charge.
What is a Credit Report?
A credit report is a summary of a person’s credit history which lenders pay credit bureaus to access to run a credit check. Credit reports consist of the following financial information:
- Credit cards and how many
- Loans and how many
- Amount of money owed
- If bills are paid on time or late
- If bankruptcy has been filed
Federal law allows a person to get a free copy of their credit report every 12 months from each of the three nationwide credit bureaus: Equifax, Experian and TransUnion. To get your free credit report visit, AnnualCreditReport.com or call Annual Credit Report at 1-877-322-8228.
What is a Credit Score?
A credit score is a number calculated based off the information in a credit report. Credit scores usually fall between 300 and 850 – the higher the number, the better the credit. A low score makes the person a risk for lenders, making it harder to get a loan or credit card which come with higher interest rates.
To calculate credit scores, credit bureaus use the following information from credit reports:
- Amount of money owed
- If bills are paid on time or late
- How long credit has been established
- How much credit is accrued
- New credit requests
Unlike credit reports, there’s no free annual credit scores, however, credit bureaus and credit card companies may provide free credit score checks. If you see an offer for a free credit scores, read the fine print to ensure you won’t be charged for credit monitoring services.