Focus On Your Credit Reports

1. You have multiple credit scores.
Most consumers are well aware that they have a credit score. What many don’t know is there are actually thousands of credit scores available. They are offered by various companies that use data to evaluate your financial  history and provide a risk assessment to lenders.

Don’t concern yourself too much with the exact number that you find as there is no guarantee that your lender will use the same numbers that you found. That being said, right around 90% of lenders use the FICO scoring model when making their lending decisions. Though they are not typically used for lending decisions, online scoring models can be useful in tracking your credit building progress and changes in your scores, but don’t put too much weight on the number that you see.

2. Focus on your credit reports, not your credit scores.
Your credit reports from Equifax, Experian, and TransUnion (the three major credit bureaus) contain the information that make up those various credit scores. So no matter what credit score you see, the information on your credit reports was used to calculate it. Taking advantage of your right to a free annual credit report is crucial as it allows you to ensure there are no mistakes on your credit reports. Verifying the information on your credit reports is accurate ensures that your credit scores are reflecting your financial history correctly so you aren’t being judged falsely when applying for credit.

3. Credit can affect employment opportunities, apartment rentals, and insurance.
Employers, landlords, and insurance providers may run a credit check for applicants. This means that your credit history can limit your employment and housing options, and determine the rates you pay for insurance. Consumer Reports released a study in July 2015 that found insurance rates on average tend to be higher for good drivers with bad credit, than bad drivers with good credit.

Bottom Line:
Your credit history plays a significant role in your financial life. Educate yourself on the information that is used to make these decisions, and get familiar with FICO scores, as they are the most commonly used of any credit scoring formula.

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