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Understanding Your Personal Credit Report

Do you actually know what goes into the report that can determine so much of your financial status and opportunity?

By Ryan Velez

Yes, we see the commercials and hear vague things about our credit. But do you actually know what goes into the report that can determine so much of your financial status and opportunity? Black Enterprise tries to explain exactly how things work. For one, your personal credit report is being updated for you by the three major personal credit reporting agencies of Experian, Equifax, and TransUnion, any time one of the following occurs:

• A job is added or terminated

• A residence is added or terminated

• An installment loan is opened, paid, or removed

• A revolving credit line is opened, paid, or removed

• Average credit age changes

• Average credit utilization

• Credit payment history changes

• A credit inquiry is added or removed

• Public records are added, paid, or removed

It’s also important to understand the breakdown of what financial factors weigh in on your credit score”

• Your payment history along with the presence of any public records: 35%

• The outstanding amounts you owe, along with current credit utilization: 30%

• The length of time you’ve had the loans/credit lines: 15%

• The moment a new loan or credit line is opened: 10%

• Your current mix of loans and credit lines: 10%

A credit score ranges from 300 to 850 and:

• A score under 579 is considered Poor

• A score between 580 and 669 is considered Fair

• A score between 670 and 739 is considered Good

• A score between 740 and 799 is considered Very Good

• A score between 800 and 850 is considered Excellent

Not happy with where you are at? There are a few things you can do. For one, work to remove any negative information that can weigh your report, like late payments. Also, be sure to read things over to see if anything is being reported incorrectly. You then need to balance this out with good credit information, establishing additional revolving credit lines and installment loans for a good mix of entities reporting good credit history.

It can be tempting to try and skip this process and go for the quick fix, which is what many “credit repair” companies offer. However, oftentimes, these promises are deceitful, and end up with you paying larger costs in the end. Your best option is trying to do the work and take the reins yourself to improve your credit.