Last Updated On : 02/23/2018
A guide to credit report scores from credit report agencies
When you apply for a secured or unsecured loan, your lender will refer to your credit report for ascertaining your credit risk. If you have a clear credit report, chances are that your lender will increase your credit limit and offer you loans at low interest rates. For maintaining a clear credit report, it is important that you keep checking your credit report on a regular basis for finding out any erroneous entries that might be present. You also need to understand how credit scores are calculated and how these affect your creditworthiness.
First you need to get a copy of your credit report from anyone of the top three credit report agencies namely Equifax Credit (http://www.equifax.com), Trans Union (http://www.transunion.com), and Experian (http://www.experian.com). Before contacting any lender, you should find out your exact credit score and ensure that it is enough for getting a loan approved at low interest rates. This is necessary because the lender may point out mistakes in your credit report and making entries to reverse them can take at least 30 to 60 days.
Many people do not know the difference between ‘soft inquiry’ and ‘hard inquiry’. When you check your own credit report and score, it is treated as a soft inquiry and does not affect your credit score in anyway, whereas when a lender does the same, it is treated as a hard inquiry and reduces your credit score by a few points. This means that there is no harm in checking your own credit report and score.
Each of the three credit report agencies follow different methods of calculating credit scores, which means that you will get different credit scores from different credit report agencies. The credit score ranges from 300 to 870. A high credit score means that you have better chances of getting a low interest rate loan. Your credit risk decreases with an increase in your credit score. For getting loans with low interest rates, you need to have an average credit score of 680 or above. Lenders typically calculate the average by using credit scores provided by all the three credit report agencies.
It is not surprising to find errors on the copy of your credit report as all the three credit report agencies collect data from various sources and may sometimes make errors while uploading. Statistics reveal that more than seventy percent of credit reports contain erroneous entries.
It is important that you inform your credit report agency about the errors because of their impact on your credit score. You may also contact the creditor directly and ask him to provide the correct information to the credit report agencies. In case you suspect a fraud, you can ask your credit report agency to place a fraud alert on your credit report. This way you will be able to prevent chances of fraud and protect the authenticity of your credit score.
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