Credit Reports & FICO® Scores

Most credit reports begin with personal data, such as your name and any former names. It also lists a history of your addresses and employment, changes in marital status, your date of birth, and your social security number.

The public records section reflects all lawsuits to which you are a party, as well as any liens or legal claims on your property. Any type of activity that is recorded with the county will be reflected here too, including bankruptcies, judgments, foreclosures, and court-ordered child support collections.

The bulk of a credit report provides detailed information about your credit history. Read this section carefully for accuracy, as well as to know when any negative information is due to drop off. It will list such data as:

Each time you apply for credit, an inquiry appears on your credit file. Inquiries also appear when a creditor checks your file after you’ve applied for credit, when your current creditors do a routine credit analysis, and when a potential landlord or employer checks your report.

Don’t despair if you have negative information on your credit report. Most of those items are removed automatically after a specific period of time (often called “aging off”). Accounts that you have consistently paid on time, or that were paid in full as agreed may be reported indefinitely. Having this kind of long-term positive information on your report reflects well on you as a credit risk.

So what will eventually be purged from your credit file, and how long will it take? It depends on the activity:

Fair, Isaac and Company developed the most commonly used score, called a FICO® Score. These scores range from 300 to 850, with a higher number being indicative of less risk. Generally, the higher your score, the easier it will be for you to get a loan or other credit instrument with a low rate of interest. Though each of the three major credit bureaus uses this system, it is sometimes called a Beacon or Empirica score.

When you access all three of your credit reports, you may find that your score is different on each. This is usually because each report contains slightly different information.

Though there are many categories of credit information used to determine your FICO® Score, some are much more significant in their impact than others:

Payment history = 35 percent. The more consistent your payment history, the better your score will be. Recent, frequent, and severe late payments have a particularly strong negative impact. Bankruptcies, judgments, and collection accounts will also lower your score dramatically.

Amounts owed = 30 percent. The amount of outstanding debt you have has a strong impact on your credit score. Carrying high balances, especially if the balances are close to the credit limit, can lower your score.

Length of credit history = 15 percent. Accounts that you’ve had for more than two years will have a more positive impact on your score than newer accounts.

New credit = 10 percent. The type, number, and proportion of recently opened accounts matter to your score, as do inquiries. All mortgage and auto loan inquiries within a fourteen-day period are considered just one for scoring purposes, and any mortgage or auto loan inquiries made within 30 days of an application are disregarded. Neither accessing your own reports nor employment inquiries is factored into your score. “Pre-approved” credit offers have no impact either, unless you actually apply. Working toward reestablishing a positive credit history after past payment problems counts in this section as well.

Types of credit used = 10 percent. Having and using a variety of credit instruments (such as credit cards, retail accounts, installment loans, a mortgage, and consumer finance accounts) responsibly is favorable to your score. It proves that you can handle the different responsibilities that come with each debt type.

Credit scores constantly change with credit activity, and recent events matter more than what happened long ago. While there is no perfect credit score, most mortgage lenders look for a score of at least 620 when considering you for a good loan.

A bankruptcy risk score analyzes the data in your credit file for traits that are common among those who file for bankruptcy protection. Creditors use them to make as precise lending decisions as possible. Be aware that for some bankruptcy risk scoring models, higher numbers indicate a greater likelihood of default (with scores ranging from —200 to 2018). Others follow the more traditional system of lower scores indicating an increased level of default risk.