Credit is a scary, daunting, and confusing part of personal finance and gaining financial freedom. For many, it’s so overwhelming that they overlook it until it’s late. Then, when they need financial help to get through an emergency by borrowing a loan, they are denied because of poor credit. Having good credit is vital to creating financial freedom for yourself. Your credit is judged and scored by United States Credit Bureaus. Elevated Credit is here to help you learn to navigate credit scores and credit reports so that you can be in charge of your finances again.
Credit is used in the consumer industry to indicate how trustworthy you are with paying back the money you have borrowed. Your level of trustworthiness with borrowed money is measured by a number known as a credit score that ranges from 300 to 850. This score is impacted by many factors, such as your credit history, the total amount of debt, debt payment history, number of open accounts, accounts in collection, and overall debt to income ratios. Financial institutions report this activity to credit bureaus, who then calculate a credit score based on that information. The higher a person’s credit score, the more likely they are to be trusted by lenders and creditors to borrow money or take out lines of credit.
There are two main types of credit that consumers frequently use. One type is known as installment loans. These are specific amounts of money that borrowers take out to use for a specific purpose. Examples of installment loans include mortgages, car loans, or business loans. The other type is known as revolving credit. This is a never-ending line of money that you can borrow and keep paying back each month for everyday items. People often use revolving credit by swiping a credit card for costs like gasoline, tickets, furniture, or travel.
A credit bureau is an organization that researches and compiles data regarding people’s credit activity and information. These United States credit reporting agencies then sell this information to creditors. Creditors, such as banks, credit card companies, mortgage companies, and other personal lending companies, use the information from the credit bureaus to decide if they want to allow an individual to borrow money.
The compiled information provided by the credit bureaus are known as credit reports. This information is provided along with the credit score that they give the individual based on their historical credit activity. While credit bureaus do not decide whether or not an individual will receive a loan or line of credit, they still hold a great deal of power. The reports they provide weigh heavily on whether credits will approve you for a loan. That is why having a low credit score can hurt one’s financial well-being.
These credit bureaus have been regulated by the Fair Credit Reporting Act since 1970. This bill was passed to ensure that consumers remain protected. It prevents these credit bureaus from inputting negligent or outright fraudulent information into their credit reports.
There are about 400 consumer reporting companies in the United States. Some are larger than others, and some report on different types of data than others. Examples of smaller companies reporting on consumer credit include Clarity Services, ChexSystems, MicroBilt/PRBC, CoreLogic Credco, SageStream, Innovis, LexisNexis Risk Solutions. Some of these provide similar information as larger credit bureaus, and some provide specialized information on specific types of data. These companies are lesser known because there are three major credit bureaus in the United States whose names most people are familiar with. These three major bureaus are Equifax, Experian, and TransUnion.
Credit scores and credit reports can be very confusing. There is a lot of data that go into them, and it can be overwhelming to learn what you should and shouldn’t do when trying to build your credit. Elevated Credit is here to save you time by guiding you through the process of improving your credit so that you can gain financial freedom. Our services include credit report analysis, resolving credit disputes on your behalf, and ongoing credit monitoring. Call today to schedule a free consultation to create an individualized action plan to improve credit.
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