Credit 101: Everything You Ever Wanted to Know about Credit

To understand credit repair information, it's helpful to have a solid foundation of knowledge on how the process works as well as the credit itself. Here are the answers to everything you've ever wondered.

All About Credit Reports

A credit report can reveal a lot about you. Think of it as a financial report card, of sorts. In short, a credit report is a documentation of your credit obligations, both past and present. In addition to personal information (like places of residence, employers, birthdate, social security number), your credit report contains a record of all your debts and a history of payments on those debts. Credit reports are maintained by three credit bureaus: Experian, Equifax, and TransUnion. When you request a credit report or a creditor solicits information about you, these bureaus provide the information. By law, these credit reporting agencies must also keep a record of who views your credit report. Whenever someone accesses your credit report, the name of the person or company and the date they accessed your information will be noted on your report usually for about two years.

Who Has Access to Your Credit Report

The Fair Credit Reporting Act restricts access to your credit report to the following situations:

• Response to court order
• During the process of insurance underwriting
• Employment screening
• Eligibility screening for a government grant
• Legitimate business transactions (e.g., offering credit, collecting debts, or checking credit report of current customer)
• Disclosure to the consumer (you)
• Determining the risk of loans for investing purposes
• Determining someone's ability to pay child support (government inquiry)

Credit Scores: What They Are, Where They Come from, and What Affects Them

A credit score is a three-digit number that is produced from an algorithmic model that interprets and scores the data contained in your credit report. Credit scores can range from 300-850. Most people fall within the 600-800 range. A credit score is designed to predict the likelihood that you will repay your credit obligations in a timely fashion. The current model used for credit scores is called a FICO score, named after The Fair I Corporation that came up with it.

What Affects Credit Scores

Applying for a credit card, starting a new line of credit, or making your car payment are all examples of what can affect your credit score. Here is the breakdown of what influences your FICO score:

• Payment performance history (35%)
• Present level of indebtedness (30%)
• Age of credit history (15%)
• Pursuit of new credit (10%)
• Types of accounts in credit report (10%)