Good Credit – I Want That!

by. Holly Petraeus and Corey Stone

Did you know that there are now dating websites where potential partners provide their credit score for you to check out? People know it’s important to have good credit. But, there’s still a lot of confusion about how to actually build and keep a good credit report.

First of all, what is a credit report?

In a nutshell, it’s a report that looks at some of your bill-paying history, your applications for credit, and public-record information about you like bankruptcies, liens, and foreclosures.

Credit-reporting companies (the big three are Equifax, Experian and TransUnion) collect this information, organize it into reports, and sell the reports to businesses so they can make decisions about whether to lend to you, and at what rate. Businesses believe that how you’ve handled credit in the past predicts how you will handle credit in the future – and how risky it would be to take you on as a customer.

Based on your credit reports, you will be given a credit score by the credit-reporting companies. You don’t just have one credit score – each company does their own. And there can be other scores, too; the ones businesses use most are calculated for each of your credit reports using formulas from the Fair Isaac Corporation (FICO.) Lenders use these scores as a quick and convenient way to decide whether or not to do business with you, or on what terms. A low credit score can lead to things like your being turned down when you want to rent an apartment, paying a bigger deposit for a cell phone contract, or being charged a higher rate of interest for a car loan or credit card.

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