Latinos, if you want to be successful financially, your credit report is the second most important tool in your arsenal. A good credit report opens doors to opportunities others do not have, such as getting a small business loan.
Detailed below is an explanation of what is in your credit report. Make sure it's accurate and protect it like gold.
1. Personal Information Section: names, surnames, known aliases, Social Security number, date of birth, where have you lived, your last known address, place of work, name of your spouse, judicial cases and any public document, like bankruptcy and mortgage execution (foreclosure).
This information tell a creditor about your character and habits. For example:
If you change your residence every 6 months, you do not show stability; if you change work constantly, that can compromise your capacity to pay accounts.
To avoid discrepancies in your file, try to maintain constancy; for example, if use your maiden name, do not fill applications of credit with another name, or vice versa.
2. Credit Accounts Information: all types of mortgages, personal loans or your rotating accounts such as credit cards.
Reported are: which are active and which are closed, the amount you owe on each one, total of the minimum payment, if you have delayed in your payments, and how many times you've been late in making payments
The best way to take care of your credit is to pay your accounts on time.
The delayed payments give you very bad credit reference. In the calculation of your credit score, the number of late payments have carry a great weight. It represents 35% of your overall score.
If you have difficulties paying on time, call your creditor and negotiate a new payment schedule. That way you will not get penalized for late payments. You will avoid late fees and you will avoid a negative blot in your credit report.
3. Credit Inquiries: Reports all businesses that have requested information on your credit, whether you have applied for a specific credit card or inquiries if you're seeking an to rent an apartment.
It provides details on businesses that have investigated your record. The details include names, addresses, dates and reasons for the inquiries. Many requests for new credits cards, for example, most likely to portray you as an avid user of credit cards. You could appear as a credit risk if all those credit card requests were approved.
4. Credit Score: This number, that usually goes between the 350 and the 850, is a mathematical representation of the quality of your credit, based on standard criteria. It utilizes your accumulated data. A higher credit score represents a good credit quality. This is very important because with a higher credit score, the lenders view you less of a credit risk.
It is possible that your score vary among the three main credit bureaus. It is possible that information in one report is not on the other two reports. So check all three bureaus for accuracy and consistency
This score also is known like FICO Score because it was designed by Fair Isaac & Co. at the end of the 1950's. Since then is the criteria creditors use to evaluate the credit quality of an individual.
The exact formula of how this score is calculated is not public information. The Federal Trade Commission, the entity responsible for watching for the rights of the consumers in the United States considers this disposition as acceptable.
You can ask for a free copy of your credit report from the big three credit reporting agencies: Experian, Equifax and Trans Union. They are subject to the Fair Credit Reporting Act.
We will cover how to fix inaccuracies in the next article.
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UPDATE: Greg Souther, owner of Greg Souther Consulting and Seminars, advised TLE that "... credit reports do not contain jail sentences or if you have been turned down for insurance". Thanks Greg for the heads up!
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