Understanding your credit report and credit score

Holicent

VIP Contributor
To get the best refinance rates for your mortgage, it is crucial to understand your credit report and credit score. Your credit report and credit score are used by lenders as a way of determining how much money they will lend you and at what interest rate. The more favorable your information, the lower your interest rate will be.

The three major credit bureaus — Experian, Equifax and TransUnion — each maintain a database of information about the financial health of people in the United States. These databases are used by many lenders and creditors to determine whether someone has good or bad credit or whether they will be rejected for a loan or credit card.

Each bureau has slightly different scoring systems that assign points to different areas of your credit history: payment history (30 percent), amount owed (15 percent), length of time with the same creditor (10 percent), new accounts opened within past year (5 percent) and new accounts opened overall within past two years (5 percent).

The highest possible score is 850, which indicates that all areas of your file are in good shape and that there's nothing on your record that would prevent you from getting approved for loans from most banks and lenders.
 

Jasz

VIP Contributor
Credit reports are an important part of your financial life. They help lenders determine the risk of lending money to you and whether they feel they can trust you to pay it back. By understanding your credit report, you can make better decisions about what loans, credit cards or other financial products are right for you.

Credit reports give a snapshot of your credit history as of a specific date. Credit scores are based on the information on your reports — including payment history, amount owed, length of time in repayment and new accounts opened. The better your payment history is in relation to the amount owed on each account, the higher your score will be. A high score means less risk for lenders in extending credit to you; conversely, a low score may mean that lenders won't consider you at all because they think they don't have enough information to make a decision about whether they'll lend money to someone with such poor credit history.
 
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