Each Credit Agency Has A Little List
Credit is recorded by agencies that act as clearinghouses of information about consumer credit, specifically, how consumers use credit over time. There are three agencies that have come to dominate and they are the ones that lenders will turn to when they want to assess the creditworthiness of an applicant. They compile a record of credit applications that consumers make and the record of their behavior when they make payments.
The value of these credit reports is in the amount of information that you contain and they give a detailed picture of how you are likely to behave and if you are going to be responsible based on your credit history and public records. The agencies have deeply involved relationships with lenders and as part of the contract to gain access to consumer records companies report your behavior to the agencies.
Reducing Your Creditworthiness To Points
There is another aspect to your credit record that is derived from the information that is reported about your behavior. The Fair Isaac Credit score or FICO score reduces your credit worthiness to a number. This has become the shorthand for assessment in the financial services industry.
You have the right to review all of your credit reports without charge once a year and every consumer should do so. The agencies and regulators have agreed on a website to allow access at annualcreditreport.com. The agencies also run credit-monitoring services on a variety of terms, a common one is for a monthly fee. Credit Karma is a recent entrant into the market that is disrupting these paid services because you can sign up for free and has immediate access to your credit records and to a wide array of information about your financial self.
Taking Over The World
Your credit score and reports have become vital parts of the modern world. The value and virtue of this state of affairs is one that could be argued at length. In practical terms it is something that must be dealt with, whether you agree with it in principle or not. Everything from banking access to insurance rates and who gets hired for employment are all decided based on the credit background of the applicants.
It used to be that hiring decisions depended on character references and references. Those days are now gone as litigation has made it difficult to give a reference without incurring liabilities. For example, in California and presumably other states as well employers will now limit references to giving confirmation of employment dates and job title. Hence the same companies are forced to seek alternative sources of information and credit histories have become established in that role.
You should take advantage of the information available about your credit reports as discussed above, even if you have no immediate plans to apply for a loan. Getting your financial house in order is vital for all sorts of transactions these days. It is a process of creating a long-term record and you will be glad of the effort invested when the time comes to begin hunting for a home.