Your credit report, why it does matter

Not only will understanding credit reports help you make important financial decisions, it can also help you see just what it is that is keeping you from getting the credit that you may need.

A credit report is a document that includes all your pertinent personal and financial information. It will contain your full legal name, your social security number, previous and current addresses, date of birth, and current and previous employers. This information has been obtained from any previous credit applications you have filled out.

This report will also include information about any financial accounts you have now or have had in the past. This will include any loans, credit cards and their credit limits, monthly bills, and so on. It will also include the names of any other persons that may be responsible for payment on these accounts.

Any financial situations that you have been involved in that are public record will also be included. This means that bankruptcies, tax liens, judgements, overdue child support, etc., will also show up on this report.

Inquiries are also marked on your credit report. Anytime you apply for a credit card, loan or anything that requires an institution to request a copy of your credit report, it will be noted.

Your credit score is based on a mathematical equation that evaluates all the information on your credit report. The end result is called your FICO Score. FICO stands for Fair, Isaac, and Company, the organization that developed the scoring mechanism. This score is what will be used by companies to determine whether you are a safe financial risk or not. In order to even have a FICO score, you must have at least one open account on your credit report and that account needs to have been open for at least six months.

Your score is influenced by your financial history. Outstanding debts past 30 days, consistent late payments on monthly bills, and any collection action that has been brought against you will determine what your score will be. Your credit score will influence not only the decision to give you the loan or credit card, but also the amount of interest to attach to the line of credit. The higher your credit score, the lower your interest rate and vice versa.

Knowing and understanding your credit report is vital to getting a mortgage, car loan, and even renting an apartment or getting a job. If you have never seen your credit report, check it out soon. There is a chance that yours may contain errors and it's critical that you get those errors cleaned up quickly.

But what if you have no credit history? Can I get a credit card? In this no credit history article you find some tips about how you might get a credit card when having no credit history