What is a
Credit Report?
Credit is often used to finance major purchases, such as
homes, automobiles and education, but for the average
consumer, credit also covers the cost of gas and groceries.
All credit purchases leave a paper trail in the form of bank
or credit card statements, but did you know that this
information trail is automatically funneled into your credit
report? A
credit report is a detailed outline that tracks
past and existing debts and any other information relevant
to your credit history.
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What is a Credit Score?
A
credit score, sometimes called a credit rating, is a
quantifiable number system used to calculate whether a
borrower can successfully pay off their accrued and any
future debts. The credit score is calculated using
information from the consumer's credit report, such as
repayment history and documentation of outstanding debts.
Lenders use credit scores in order to make key decisions on
what credit limits and interest rates to offer prospective
borrowers.
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Credit Report Basics
A
credit report contains a wide range of information, from
your most basic personal information to detailed accounts of
past financial dealings. The information included in a
credit report is used to calculate one's credit score, which
can affect one's ability to take out advantageous loans and
lines of credit. A strong credit history is a powerful tool,
providing a consumer with additional purchasing power
through access to competitive interest rates and higher
credit limits.
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Credit Score Basics
In the past, financial lenders did not have a significant
system in place to establish risk for borrowers. Lenders
used a mixture of intuition, past experience, and a biased
review of past consumer behaviors in order to minimize the
risks inherent to credit lending. Today, basic information
taken from a credit report can be used to calculate a fair,
accurate
credit score.
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