Credit Education

What does your credit report contain?
Credit reports from the three major credit bureaus (Trans Union, Experian and Equifax) all contain the same type of information, although it can be presented in a different format on each report. The information on each credit report that is used to identify you is:

  • Your Address
  • Your Social Security Number
  • Your Employment Information

This information is not used when calculating your credit score. It is strictly used just to indentify you. For example, if you change your address with one of your creditors they will then update the credit bureaus and the new address will be listed on your credit report.

Credit Accounts
These would include mortgages, car loans, credit cards, department store cards and bank loans. They all report to the credit bureaus, although some accounts may not report to all of the credit bureaus. Most creditors report the following information:

  • The loan amount or credit limit
  • The date the account was opened
  • The payment history
  • The payment terms
  • The date the account was closed/paid off (if applicable)

Credit Inquiries
An inquiry is placed on your credit report every time you apply for credit. You are giving them permission to obtain a copy of your credit report for their review. The majority of creditors will only check one credit bureau but some will access all three during their decision process. Inquiries stay on your credit report for a period of 2 years. When a creditor pulls your credit it is classified as a “hard inquiry” but when you access your own credit report it is classified as a “soft inquiry” and does not have any affect on your credit score.

Public Record Information
Information from the courthouse is listed under this section and can include items such as:

  • Wage Garnishments
  • Judgments
  • Bankruptcy
  • Tax Liens

Collection Accounts
Third party debt collectors are often referred to as collection agencies. They buy charged off debt from original creditors and attempt to collect on the past due amounts, often at a significant discount.

How is your credit score calculated?
There are five categories that the credit bureaus use to calculate your credit score. Each category has a different value, represented by a percentage. Look at the table below to see what factors impact your credit score the most:

breakdown

These percentages are an “estimate” and do can vary for different situations and consumers. For example, a consumer with a limited credit history will be scored and calculated differently then someone with a lengthy and well established credit history.

Payment History

  • The payment history on all types of accounts listed within your credit report (credit cards, department store cards, bank lines of credit and loans, mortgages, car loans, etc.)
  • Any public records listed on your credit report (tax liens, bankruptcy, law suits, judgments, wage garnishments, etc.), collection accounts, and any negative or past due creditor account(s)
  • Length of delinquency; how long each account is/was past due
  • Amount that is past due on collection accounts and negative creditor accounts
  • Number of negative accounts listed by each credit bureau
  • Number of satisfactory accounts listed by each credit bureau

Amount Owed On Each Account

  • Number of accounts with balances remaining
  • Percentage of credit used compared to the total credit that is available, often referred to as utilization
  • Percentage still owed on installment loans, such as car loans and mortgages

Length of Credit History

  • Time each account has been open
  • Time since new accounts have been opened
  • Average age of accounts

New Credit

  • Number of accounts opened that are less than 6 months old
  • Number of recent credit inquiries
  • Time between accounts being opened
  • Time between each credit inquiry
  • Credit added during a “rebuilding” phase

Types of Credit Used

To get the highest possible credit score, they like to see a variety and or mix of credit types: (credit cards, department store cards, installment loans, auto loans, mortgages, etc.) – A good mix of accounts is desired, and it is best to stay away form products that are labeled as “subprime”

The following does not affect your credit score
United States law prohibits credit bureaus from considering any of the following:

  • Race
  • Color
  • Religion
  • National Origin
  • Sex
  • Marital Status
  • Age
  • Demographic Location
  • Soft Inquiries
  • Accounts Currently On Your Credit Report
  • Employment Length Or History
  • Salary Or Income

Receipt of public assistance, or the exercise of any consumer right under the Consumer Credit Protection Act is not used when determining a credit score.