Credit Scores - Credit Repair Information

A consumer credit report is a document prepared by the credit bureaus that provides the following: Personal Information, Credit History, Public Records (bankruptcy, judgments, etc.), and Inquiries. Other than inquiries, all of the above information remains on your credit report for seven to ten years. This information is documented and sold to current and/or potential lenders, employers, landlords, and insurance agents for the purpose of providing the consumer's payment history and credit worthiness.

Based upon the Fair Credit Reporting Act, credit grantors are permitted to review your credit report to objectively determine your credit worthiness. There are 190 million credit active people in the United States who have a credit file, meaning they have applied for credit in some form since they were eighteen. As consumers pay their bills, most lenders report the payment and account information to at least one of the three credit bureaus. However, a recent study shows that up to 79% of all credit reports contain inaccuracies.

While a bankruptcy, judgment, or late payments can lower your credit score pretty quickly, improving your score takes time. It is best if you check your credit scores and credit reports at least every 6-12 months, especially prior to applying for a loan. This way, you have no surprises when a potential lender views your report. You'll have time to work on improving any inaccuracies on your credit report and work to increase your credit score, if needed.

Your credit score comes directly from your credit report and the information in it. Your credit report and credit scores are the leading factors in determining the credit that is available to you and the interest rates that lenders can offer you. It is a snapshot of your credit risk at that point in time, and can (and often does) change frequently. A credit score is a mathematical equation that is based solely on the information found in your credit report.

The credit score was designed to tell lenders how much of a credit risk you are. The higher your credit score, the lower the risk. A credit score can range from 300 - 850. If your score is above 700 then you are considered low risk and it should not be hard for you to get credit. If your credit score is 600 or less then you are considered a higher risk, meaning lenders will either deny you credit or give you high interest rates.

Your credit scores will vary from bureau to bureau because your score is based on information found on each credit report. Your reports can vary from bureau to bureau, and, for a variety of reasons, usually are not the same. If the information is exactly the same on all three reports, the scores should be within a few points of each other. The agencies may also list your information differently and thus, you will have different scores from different reporting agencies.

Generally, as your risk of default decreases, your score increases. Industry experience shows a direct correlation between low scores and high default rates. This means that you may have a hard time convincing a creditor to make you an affordable loan (or any loan at all) if your score is far below average. But just as your credit history can vary from credit bureau to credit bureau, so can your credit scores. It is possible to have a high score with one credit bureau and a low credit score with another, just as you might have a clean credit history with one bureau and errors on record with another.

Credit scores are on a scale from around 300 - 850, with 850 generally being the highest credit score possible. The current national average is 680. While the national average credit score is 680, only 13% of the nation's population has scores above 800. At the other extreme, roughly 15% of the population has a credit score lower than 550. In general, a good credit score is anything above 700.

Don't lose hope if you have a low score. If it's because of your payment history, start taking the steps necessary today to improve your credit score. You can build up your credit score by following the guidelines in the section 4.