Learn All About Credit Scores

A credit score is a number that represents the potential of a borrower to repay a loan, based on their credit history. Simply put, it's like a batting average in baseball—the higher the credit score, the better your track record is with lenders. Your score reflects your past payment record, the amount of money you owe creditors, the amount of available credit you have and numerous other factors.

Credit scores are considered to be very good indicators of whether a borrower will consistently repay his or her loan, just as batting averages are good indicators of whether or not a baseball player hits consistently.

Although lenders do use credit scores to help them evaluate loan applications, it's just one of the many factors considered in the approval process. Good lenders see the entire picture. Even when an applicant's credit score is low, some lenders try and find other redeeming factors that could help overcome the negative credit record.

If your credit score is lower than you'd expect, don't worry. There are ways that you can start to improve your credit rating.

Equifax, Trans Union and Experian are the three primary national credit bureaus that collect credit information on consumers and provide credit scores and reports to home loan companies and other lenders. Lenders frequently will merge all three of these reports into a combined credit report.

Depending on the particular lender, standards for loan approval may differ considerably. In general, however, credit scores play a big role. Credit reports are available to consumers, but it is up to you to take the initiative to find out what your credit score is. Also be sure to talk to the lender about their credit profile requirements for loans.

When Have You Last Checked Your Credit Report?

Even people who think they have good credit sometimes get an unpleasant surprise when they find problems in their credit report.

In some instances, it could be that they don't fully understand how late payment history and bad borrowing habits can affect their credit.

But not understanding how credit works isn't always the problem. Sometimes a poor credit report isn't your fault at all. Credit bureaus can have outdated or incorrect information. Another individual's information could have been confused with yours. Identity theft and credit fraud can also result in mistakes that need to be corrected in order to improve your credit rating.

Checking your credit report at least once a year is a very good idea. By doing this, you will find out if there are any mistakes that need to be corrected, or whether you need to work on ways to raise your credit score. This is especially important if you're applying for a mortgage or other home loan, since you will improve your ability to get approved and for the best possible terms.

If you find any mistakes in your credit report, quickly correct them, and put your corrections in writing to the credit bureaus and lenders involved. And be sure to follow up a month or two later to ensure that these mistakes were fixed!

You Have the Right to Receive Your Credit Reports

As a consumer, you have the right to see your own credit report!

Thanks to the Fair and Accurate Credit Transactions Act (FACT Act), U.S. residents are entitled to one free credit report a year from each of the three major credit reporting agencies. For the credit report to be free, it must be ordered by:

• Going online to www.annualcreditreport.com; or
• Calling 1-877-322-8228; or
• Completing the form in the Annual Credit Request brochure and mailing it to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281

If you've been turned down for a loan, credit card, insurance policy or job due to a negative credit report, you're also entitled to a free credit report from the credit bureau within 60 days. In those cases you would contact the credit bureaus separately, as indicated below. Otherwise, you can easily obtain your report for a small fee.

Equifax
Credit Information Services
P.O. Box 105496
Atlanta, GA 30348-5496
800-997-2493
http://www.equifax.com

Experian (formerly TRW)
National Consumer Assistance Center
P.O. Box 2104
Allen, TX 75013-2104
888-397-3742
http://www.experian.com

Trans Union LLC
Consumer Disclosure Center
P.O. Box 1000
Springfield, PA 19022
800-888-4213
http://www.tuc.com

Getting Your Credit Report

Credit experts advise that you should get your credit reports from all three of the major credit bureaus if you want to get the full picture of your credit history. It's also important to bear in mind that all three credit bureaus do not interact with all lenders and credit providers. Some lenders may deal with only one bureau, while others may seek reports from the others.

Countrywide wants to make sure you keep on top of your credit report information. The following credit products may provide a good overview of your credit status:

Take control of your credit with Experian’s Triple Advantage

Experian’s Triple Advantage is a way for you to get your credit report with all three national credit reporting companies on a daily basis. When you enroll, you receive alerts you if there are key changes to any of your credit reports, you’ll get ID Theft Guarantee, plus access to your Experian credit report and credit score. Find out more about Experian’s Triple Advantage