In the United States there are three main credit agencies or repositories; Trans Union (uses an Empirica score), Equifax (uses a Beacon score) and Experian (uses a Fair Isaac Score a.k.a FICO). Each of these agencies uses a rating system or more commonly known as your credit score. This score can range from 330 to 800. The lower the score the poorer the credit and vice versa. If sufficient data either good or negative is lacking, an agency may not give any score at all or give 0.

Factors that contribute to score are; number of open accounts, the length of time an account has been opened, current balance owed in comparison to the credit limit, inquiries within a 90 day period. Credit cards, car loans, lines of credit, student or installment loans and mortgages and home equity loans are what typically report to the credit agencies. Utilities, phone bills or car or home insurance does not report on a credit report. If in the event that any of the previous debts are delinquent to the point of being turned over to a collection agency, the collection company will report the debt and this will have a negative affect on a credit report. As will late payments beyond 30 days delinquent. Public records such as bankruptcies, liens and judgments will also be reported.

While the majority of the population maintains an average rating in the 600's, anyone with a handful of collections or several 30, 60, or 90 day late payments reporting will probably be looking at a low 500 score. Anytime you are applying for credit, credit score will play a key part on the amount of credit that will be extended to you and have a bearing on the interest rate offered. The lower the score, the higher the risk and thus, the higher the interest rate. The best way to maintain a good score and an overall good report is timely payments and staying well below on credit card balances (30%) the maximum limit.

Learn more about this author, Annabella Cordova.
Click here to send author comments or questions.

---

Add your voice

Know something about Tips for understanding a credit report?
We want to hear your view. Write now!