What is Credit?

            Before I worked at Horizon Community Credit Union, I didn’t know much about credit and credit scores. I didn’t care either, and I couldn’t comprehend how one number could impact my life. I had no idea the extent to which a credit score was used, how it was formulated, or what it even meant. I’m still learning today! I now know how important a good credit score is, and I want to make sure you know too!

            Your credit “is your reputation as a borrower (Pritchard).” That reputation is supplemented by your credit report and credit score, as defined by the big three credit bureaus. All of this is taken into consideration when making lending , insurance, residence, and employment decisions. Confused? Hold on, I’ll explain!

            The big three credit bureaus that track your borrowing history are Equifax, Experian, and TransUnion. They are for-profit companies that are publicly traded on the stock market, but they are regulated by the federal government through the Fair Credit Reporting Act (Irby). You can get one free copy of your credit report from each of the listed credit bureaus. If you aren’t already getting your one free credit report from each agency, you should begin doing so. You may learn things about your credit that you didn’t know, and you may find mistakes that you need to correct. FICO, as you may hear about from Discover commercials, is not a credit bureau.

            Credit scores give the “big picture” view of your credit, and they vary a little between credit bureaus. As you can imagine, there’s a lot of information that goes into a credit report. Scores are generated by a computer program, which reads through all your credit information and generates a score. According to Credit.com, this is the scale for credit scores:

Excellent                   781-850

Good Credit            661-780

Fair Credit                 601-660

Poor Credit              501-600

Bad Credit                Below 500

            So now what? Check your credit scores, and go through the reports, and make sure all of the information is accurate. Then go to your financial institution of choice and make an appointment with someone to ask any questions and discuss ways to correct problems and increase your credit score. Be active and follow through. Credit scores are used to approve decisions in pivotal areas of your life. It’s crucial that you take an active role in increasing your score, so that your borrowing past will not hold you back from the dreams of your future.  For more tips, check out my sources, as well as this previous blog post, written by a loan officer. 

Breanna B.

Sources:

What is Credit? By Justin Pritchard

http://banking.about.com/od/creditscoresandreporting/a/whatiscredit.htm

Who are the three major credit bureaus? By LaToya Irby

http://credit.about.com/od/creditreportfaq/f/creditbureau.htm

What is a Good Credit Score? By Geri Detweiler

http://www.credit.com/credit-scores/what-is-a-good-credit-score/