ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Credit Reports and Scores

Updated on May 7, 2013
A good credit report can make this a possibility.
A good credit report can make this a possibility. | Source

So you've decided to make that next big purchase. Maybe it's that car you've wanted or that dream house. Since most of us don't have tens or hundreds of thousands of dollars on hand to spend, we have to get financing.

When you apply for a loan, lenders are looking for three things. First they want to make sure you have the income to afford the new debt as well as any other debt you may have. Second, they want to know the collateral is worth enough to in the market should you default on the loan (some loans like credit cards and personal loans have no collateral). And third, the lender needs to know that you have paid your previous debts in a timely fashion.

That is where credit reports come in.

When I was in elementary school, teachers were always warning that bad behavior and bad grades would go on your “ permanent record” that will follow you “wherever you go”. It's seems humorous now that a fifth grade spelling test would have anything to do with my future. But a Credit Report is as close to that “ permanent record” as most people ever get.

Simply put, a credit report (also known as a credit file or credit history) is a computerized review of your consumer debts and payment histories for the last 10 or so years. By looking at the report, a loan officer or underwriter is able to tell if the applicant is a good credit risk or not. The report will tell how many times the person has been 30, 60 or 90 days late on a debt and will provide a record of any charge offs, repossessions, foreclosures, bankruptcies, judgments, tax liens and more.

Consumer credit reports are compiled and issued mostly by three major credit reporting agencies. (Experian, Trans Union and Equifax). Most lenders report consumer credit information to all three of these agencies. They usually access an applicant's credit report through a credit bureau. A credit bureau is a company that collects and maintains credit information from the reporting agencies and sells them to lenders and consumers.

Lenders heavily rely on credit reports to make lending decisions. So it is crucially important that you pay all your bills on time. It is also important that you monitor your credit history to see what is being reported in your name. The Federal FACT ACT of 2003, allows you to get one free credit report a year from each of the three credit reporting agencies. Experts recommend that people regularly examine their credit reports to weed out and repair mistakes in their record, or worse, if someone has been using your credit illegally. It is important to monitor your credit so there are no surprises that pop up and cause you to be denied when you apply for that car loan or mortgage loan. Corrections can usually be made by contacting the credit bureaus for help. Google “credit reports” or any of the credit reporting agencies for information on how to obtain your free credit report. Since the same mistake can be on two or all the agencies reports, it would be necessary to fix the problems on the each of them. To avoid missing any credit, most mortgage lenders purchase merged reports from their local credit bureau. Merged reports have all three reporting agencies information in one report.

A breakdown of factors which contribute to your credit score.
A breakdown of factors which contribute to your credit score. | Source

Credit Scores

Credit scores were developed to allow lenders to make faster credit decisions. In short, a credit score is a numerical summery of your credit history. The score is generated when the lender or consumer purchases the credit report. The score is compiled through a series of statistical models. The formulas are confidential but the basically the following factors are instrumental in the compilation of credit scores:

  • Total Debt

  • Payment history

  • Number and severity of delinquent accounts

  • Recent inquries

  • Type, number and age of accounts

By far FICO is the most popular score and is used by most lenders. FICO scores have a range of 350-850. (Higher scores are better) The FICO company has slightly different scores for Bank Cards, Auto loans and Mortgage Loans.

Credit scores are used to make more rapid credit decisions. For example, manual mortgage underwriting used to take some time to reach decisions, now with credit scores and automated underwriting systems, a preliminary determination can be made in a few minutes. Car loans can be approved quickly now with a minimum of work. Credit card companies buy information from the bureaus to make pre approval offers to large numbers of people based solely on their credit score.

Fixing Bad Credit

What if your credit is bad? You may have previously not paid very much attention to your debts or there was a interruption in your income that caused you to miss payments. That does not mean all is lost, but it may take time, patience, sacrifice and hard work to get that score back up again. The best way to do is to make your regular payments on time and pay down debt.There are companies that offer to help you (for a price). But be careful when picking. According to the Federal Trade Commission, many of these companies are scammers and besides everything they can do for you, you can do yourself for much less than they charge. But credit scores are not perfect. They have been criticized as being to easy to manipulate. I won't get into what those tricks are in this Hub, but anyone with an internet connection can get access to them.

So, bad credit can be repaired. Granted much bad credit is from personal financial crisises. But it is best if you can keep your credit ratings and score high. It takes discipline and regular reviews of your credit reports. It also helps if you live within your means and only use credit when it is necessary.


    0 of 8192 characters used
    Post Comment

    No comments yet.


    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at:

    Show Details
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)