Components of a Credit Score

Knowing about what is on your credit report is increasingly becoming more important as credit has tightened up. Your credit report is your financial fingerprint and it is highly suggested that you completely understand your credit situation. We understand credit reports better than anyone else in the business. Our Credit Advisor service is designed to take the confusion out of reading and understanding credit reports. To read more about Credit Advisor, click here.

The information below breaks down the categories that make up a typical credit report.

• Applicant Information
• Fraud Alert
• Profile Summary of Credit Information
• Credit Scores
• Tradelines
• Collection Records
• Recent Inquiries
• Public Records

Applicant Information

• Full name
• Any known alias (such as maiden name or nickname)
• Current and previous addresses
• Social Security number
• Date of birth
• Current and past employers

This section gives creditors a basic overview of your personal information. Unknown names and addresses may be a sign of ID Theft.

If the information you give a creditor does not match what gets pulled from a database by using your SSN, you may be denied a loan immediately.

Fraud Alert

When information on your credit report is compromised, a "fraud alert" will appear on your report and creditors must take additional steps to verify your information.

Profile Summary of Credit Information

• Total loan balance
• Total real estate balance
• Total credit card balance along with total past due amount
• Total monthly payment
• Total real estate payment
• Total tradeline
• Total inquiries

The profile summary basically provides a picture of monthly expenses. It also shows the number of inquiries over the last 6 months. An inquiry is any time you attempt to obtain credit. Tradelines are especially important to look at because statistically they are most likely going to contain more errors than other areas of the credit report. Take note of any errors on the report in the even you decide to dispute items with the credit bureaus.

Credit Scores

The credit score takes a look at your entire credit situation, enters your data into a complex mathematical equation, and determines your risk level to lenders. Credit scores almost always vary from bureau to bureau because they all have their own proprietary model for calculating risk. If you have a high credit score which generally means over a 750, your risk to lenders is low and you will qualify for the best rate on a loan. If you have a low score of below 650, you pose a higher risk to lenders, and will most likely receive less offers with not as favorable interest rates as someone with a high score. If your score is below a 600, you may even be denied credit completely because the lender believes you might not pay the loan back.

Tradelines

The tradeline data is the body of your credit report and contains all relevant information of your credit history. This includes all open and closed loans, and open and closed credit cards.

The tradeline information listed is:

• Accounts are listed by the type of credit, loan, or credit card
• Date you opened the account (The longer you have had "credit" the more positive influence it will have on your credit score.)
• Credit limit (Ideally you should have only a couple of credit cards with high limits and low balances, a lender will look favorably upon you.)
• Loan amount
• Payment pattern over the past two years (Did you pay your bills on time? Did you pay just minimum balances?)

Collection Records

This section of the credit report is often a "big red flag" to lenders. If anything has gone into collection the account will be marked "collection" on your report. A collection shows lenders that you have struggled to pay back your debts. If you have paid off a collection, it is very important that your report is showing that you indeed paid off the debt. Often times, collection agencies misreport collection data to the bureaus so make sure your credit report is accurate.

Recent Inquiries

Always check this section because it shows how often people are asking for your credit information. Lenders are not the only ones who look at your credit. Employers often times will run a credit check on you as well. Inquiries remain on your credit report for 2 years. If there are inquiries on your report that are older than 2 years, you can have them legally removed from your report.

Public Records

• State and country court records on bankruptcy
• Tax liens
• Monetary judgments

A bankruptcy will remain on your credit report for 10 years. Unfortunately, it is very difficult to elude the stigma of a bankruptcy and it clearly shows lenders that you are of high risk when paying back debts. Credit scores usually will go back to pre bankruptcy levels in 3 to 4 years. Tax liens fall off your report 7 years after the lien is paid in full. Eventually public records will drop off your credit report and typically there is little you can do other than wait.