Understanding and managing your credit is an important part of financial health.
It's never too early or too late to start learning about it!
No matter what has happened to your credit, you can deal with it!
What is Credit Reporting?
Credit reporting is a system where companies called Credit Bureaus collect information about your financial behavior and put it into a credit report. This report is used by lenders, landlords, and others to assess risk.
What is a Credit Report?
A credit report contains information gathered by credit bureaus, including:
- Number of credit cards and loans.
- Outstanding balances.
- Bill payment history.
- Bankruptcy filings.
Who are these Credit Bureaus?
The Big 3 Credit Bureaus — Experian, Equifax, and TransUnion — collect financial information about individuals to create credit reports and scores.
How do Credit Bureaus make money?
Selling Credit Reports and Scores
Credit bureaus sell reports and scores to lenders, landlords, insurance companies, and sometimes employers. They also charge companies to report information.
Subscription Services
For a monthly fee, consumers can get updates, alerts, and monitoring tools from credit bureaus.
Selling Analytical Services
Credit bureaus analyze their data to provide insights to businesses, like predicting who is most likely to pay on time.
Your credit report may differ between bureaus
Not all companies report to all three bureaus. Some only report negative information. Credit bureaus share information with each other, but accounts can be resold or reported multiple times.
You are not their customer; your credit report is their product.
What is a Credit Score?
A credit score is a number summarizing your credit report. Higher scores indicate lower risk to lenders.
Why is Credit Reporting Important?
Credit reporting helps lenders determine loan approvals and interest rates. Good credit reports and high scores can get you better terms.
How Can You Improve Your Credit?
- Pay bills on time.
- Don't borrow more than you can repay.
- Avoid applying for too much credit at once.
- Check credit reports regularly for errors.
- Dispute any negative items and request documentation.
Remember
The credit system is set up to take advantage of people with low information. Educate yourself to maintain control.