If you want to repair your credit the initial step is to always get a copy of all three of the main credit bureaus credit reports. You can get one report from each of the bureaus for free at least one time per year or you can also get a tri-merged report that combines them all for a fee.
A credit report contains the complete history of how you have handled credit and your finances in the past. They are used by lenders as a measure to resolve if you are deemed creditworthy and meet the standards they have set in order to lend money. Credit reports are widely used yet it is interesting to note that as many as 75% of all credit reports have been found to contain mistakes and erroneous information.
The credit bureaus responsibility is limited to collecting and compiling information. Whether the information is true and correct is irrelevant to them as they can sell the report over and over again regardless of accuracy. The consumer is the only person who is concerned over accuracy in credit reporting so it is their responsibility to make sure that everything is being reported correctly.
Accuracy in credit reporting has long been a problem, therefore back in 1970, Congress passed the Fair Credit Reporting Act, which governs the fairness, accuracy and equity of credit reporting. The FCRA is the law that allows for the consumer to dispute irregularities on their credit reports.
Within a credit report is a numerical representation called a credit score. This is a measure of a variety of factors such as the length of the credit history, the debt to credit ratio, the type of credit that is held, how frequently one shops for credit and of course, the history of how bills are paid on time.
In the United States the most common credit score is the FICO score from the Fair Isaac Corporation. This is the credit-scoring model that is used by all three of the main credit reporting agencies, Equifax, Experian and TransUnion. This same score is sometimes referred to as the Beacon or the Emperica score.
Credit scores take into consideration many unbiased factors such as credit history and debt ratios, but it never takes current income or employment history into account. These two things will likely be a large part of any credit application and a big consideration for the lenders but they are never a part of the credit score.
Credit scores fall within a wide range of about 400 to 800. A score of 720 or above is considered excellent while a score that falls below 600 is considered to be a high credit risk.
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