Managing Your Credit Report

Your credit report is a record of your credit worthiness that follows you throughout your entire life based on your social security number. Credit reports are available through three separate and independent reporting agencies: TransUnion, Experian and Equifax. Anyone that you owe money to may report to any or all three of these reporting agencies on the status of your debt obligation and how you are handling the repayment of it. Information may include whether and how often you are late in paying a debt 30, 60, or 90 days, whether an account was closed at your request or at the demand of the lender, how much outstanding debt you have, or open accounts with no balance on them at all. Your credit report will also, of course also note if you have ever had debt discharged through bankruptcy within the last 7 years.

Taken together, all three credit reports and the status of them create what is known as your 'credit score'. Your credit score is a numerical representation of the overall health of your credit. Credit scores can range from as low as 300 to as high as 850, though there is no fixed maximum or minimum number that a credit score can be since the mathematical numbers used to compute it are different depending on who is asking. From highest to lowest, the credit scores mean:

• 800 or higher: Your credit is very, very good. People with credit scores this high have done a superb job of managing their credit-worthiness. You don't even have to be a millionaire or very wealthy to have a credit score in this range.
• 720-799: If your credit score is in this range it is doing great. You can qualify for very low interest rates and favorable payment terms on any debt you take out and probably wouldn't be turned down for any type of credit you asked for.
• 675-719: A credit score this high is considered "good credit." You will be eligible for most credit that you apply for and receive good to excellent interest rates.
• 620-674: Fair credit. Not exactly good, but not exactly bad either. This is where the majority of people will fall during a good economy. You may be approved for most credit accounts that you apply for, but may also be turned down on occasion, based on your income.
• 550-619: This is "bad credit". It results from having collection accounts on your credit report, paying bills or defaulting on loans. While it may be possible to receive certain types of credit cards or loans, they will be at the worst possible terms and you'd probably be better off not applying at all.
• 549 or Lower: This credit is just about as poor as it can get and you can more or less forget being approved for any loan you ask for. The good news about this type of credit is that there is nowhere to go but up, and actually going up is not as hard as most people think.
• SPECIAL - "ZERO" Credit Score: It is possible to have a zero credit score and despite what you may think, this is actually a good thing. It is reserved for those who have made a conscious decision to live completely without credit in their lives of any kind. Paying cash for everything they need, people in this situation find that their credit scores essentially "go away" and any agency that pulls their credit will find nothing at all to report.

Wherever your credit score sits, there are ways of improving it that you can do personally, or with the help of a professional credit counseling service. Paying down open debts, eliminating collections, or negotiating to remove negative remarks on your credit report can all have a positive effect on your credit score and improve your chances of getting a new loan, credit card, mortgage, and improve the terms of those loans as well. If you have any questions, please examine our Frequently Asked Questions page.