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Understanding Your Credit Report and Credit Score

Updated on June 30, 2011

Understanding your credit report and credit score is very important. A good score makes a difference when it comes to getting credit and how much you pay for credit cards, car loans and mortgages as well as other types of credit. The higher your credit score, the lower you have to pay for interest on credit cards and loans.

Good credit scores also make a big difference when you need to rent an apartment, get telephone service or utilities. By understanding your credit report and your credit score, you can save money and get the best rates possible.

How Did I Get My Credit Score?

Three non-profit, non-government-run companies store and maintain credit records for the United States. These companies, known as "The Big Three", are credit reporting agencies (CRAs). The CRAs store information about your payment, employment, marital, address, and salary history. They also keep track of any bankruptcy information and tax lien information about you.

Who Are the Credit Reporting Agencies?

The 3 CRAs are TransUnion, Equifax, and Experian. The Big Three don’t share credit information. This is why it's so important that you check your credit score at each of these three CRAs. One CRA might show you having a great score while the other two picked up a bad report on you and scored you much lower.

Credit Report & Credit Score

How Do Lenders Know My Credit Score?

Finance companies, banks, credit card companies, retail stores, landlords, and other people who make loans or offer credit get your information from the CRAs. They receive reports on people who request credit after they pay a fee.

How Did the CRAs Decide My Credit Score?

After collecting your information, the CRAs evaluate it and use a system to calculate your score. Different things have different levels of importance. For example, defaulting on a credit card lowers your score more than having a low-paying job. The CRAs use this system, giving each factor a score and then compiling them for your overall FICO score.

Which Credit Score Should I Check?

Experian, TransUnion, and Equifax all work separately and use different factors to determine your score. Because of this and the fact that they don’t share information, it's very important that you check your score with each of them every year.

Understanding your credit report and credit score is crucial if you want to get the best interest rates on credit cards, car loans, and mortgages. Use this information and work towards raising your credit scores to save money.

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