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What is a credit score?
A three digit number that lenders use to decide whether or not they want to lend you money.
The higher the score, the better your credit rating. In general, a credit score can range from 300 to 850. Most scores fall within the 600s and 700s. The boundary between a standard loan and a higher cost loan, also known as a subprime loan, is generally considered to be a credit score of 620. A higher credit score generally means you will have an easier time obtaining credit and you should be able to get credit on better terms and at a lower cost than someone with a lower score. |
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A consumer credit report is a factual record of an individual's credit payment history. Its main purpose is to help a lender quickly and objectively decide whether to grant you credit.
If you have any type of a charge account, car loan, student loan or home mortgage, then information about you is probably stored in a consumer credit database. Most of the information in your consumer credit report comes directly from the companies you do business with, but some information comes from public records. |
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Does it hurt my credit score if I check my own credit report? |
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No, your own requests for your credit report do not affect your credit score. Only those credit report inquiries made by businesses as a result of your applications for credit affect your credit score.
It's perfectly all right - and encouraged - to check your credit report from time to time, especially when you're preparing for a major purchase or have recently been denied credit. As a consumer your entitled to one free credit report per year from the big 3 credit bureaus.
A free website we recommend for pulling your own credit is www.annualcreditreport.com |
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How much does it impact my credit score when it is pulled by a credit grantor? |
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This is called a credit inquiry. Anytime a creditor or anyone else accesses your credit report it posts an inquiry. This is a record of who pulled your credit report and on what date. The credit bureaus are required to keep a complete list of all inquiries into your credit report for, in most cases, 24 months.
According to credit scoring research, consumers who are actively shopping for credit are higher credit risks than consumers who are not. This makes common sense. Think about this: would you rather lend money to someone who is applying all over town or to someone who applies only when they need credit? Since there is a correlation between shopping for credit and being a higher credit risk an inquiry will, in some cases, lower your credit score.
Don’t worry too much though. The FICO scoring models have logic built into them that addresses “rate” shopping for auto and mortgage lending. The models are smart enough to identify whether you are shopping for the best interest rate by comparing creditors and whether you are out trying to open many accounts in a short period of time.
The actual number of points that an inquiry is worth is a closely guarded secret. However, it’s safe to say that only those who are “excessively” shopping for credit will be seriously damaging their scores. The moral of this story is to shop and apply for credit only when you need it and, optimally, only after you have gotten your credit and scores in good order. |
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How long does information stay on a consumer credit report? |
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Federal law specifies how long negative information may remain on your credit report. To prevent past errors from haunting you forever, most negative information must be erased after seven years. This includes late payments, accounts that the credit grantor turned over to a collection agency and judgments filed against you in court--even if you later paid the account in full. Credit reporting agencies use the date of original delinquency or, in the case of public records, the date of filing to determine when negative information is deleted. Positive information remains on your report indefinitely.
The length of time a bankruptcy remains on your credit report depends upon which type of bankruptcy you file. Chapters 7, 11 and 12 remain for 10 years. A Chapter 13 bankruptcy (in which you repay part or all of your debts under a court-approved payment plan) remains on your credit report seven years. |
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