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Payments and default payments on your credit card are reflected on a single report called the credit report. Other credit accounts and loan defaults are also contained in such a report. The information contained in your credit report is even given a numerical value called your credit score. Creditors and lenders actually take a look at your credit report, credit score or both before granting you any type of credit, loan or mortgage to check on your credit history.
Credit Report
Your credit report basically contains information about your residence, your employment, how your pay your bills (whether on time or you always default), on whether you have filed for bankruptcy and on whether you have been sued (related to finances). Three major credit bureaus namely Experian, Equifax and Transunion maintain your report.
Information from banks, your credit card company and any other party with whom you owe something are being collected by credit bureaus and compiled for your credit report. This information is then sold to businesses that need to review such information in order to make sound credit decisions.
Your creditors and lenders actually provide such bureaus with information about your accounts like account status, credit limit, status of monthly payment, account balance and other information necessary to identify your credit worth.
Checking your credit report periodically will give you an idea of what your lenders and creditors are saying about you. You can actually obtain your credit report from any of the three credit bureaus and you can even secure one free copy each year.
It is of utmost importance that you understand how to read your credit report and the process to go through should it contain any erroneous information that you would want to dispute.
Credit Score
A credit score can range from 300 to 850 and is a numerical representation of your credit report. Based on the number, lenders and creditors can easily assess if you are a credit risk and ultimately make a decision as to whether to grant you credit or deny it.
If you have a high credit score, you are considered to be a borrower of lesser risk as compared to those who have low credit scores. People with high credit scores can obtain lower interest rates on their loans and credit cards while those with low credit scores will be given higher interest rates and will more likely be denied of a credit card application, loan application or any other type of credit based service.
The three different credit bureaus actually have their own version of credit score.
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