Your credit data can be grouped into the five categories outlined below. The percentages in the chart reflect how important each of the categories is in determining your score.
Each score is based on information the credit agency keeps about you. As the information changes—whether from improving on-time bill paying or deteriorating for money owed, for example—your credit scores change.
Most lenders use FICO scores to determine your credit risk. They often attach rewards or penalties to borrowing terms based on this risk. For example, a person with a high FICO score might earn a lower interest rate on a student loan, while someone with a low FICO score might be required to add a creditworthy co-signer to the note.
Under the Fair and Accurate Credit Transactions Act (FACT Act), consumers can request and obtain a free credit report once every 12 months from each of the three major credit reporting agencies online or by mail. (The three major agencies are Experian, TransUnion, and Equifax.)
While the report won’t assign a FICO score—that must be purchased at www.myFICO.com—it itemizes the accounts that influence the scores. Reviewing your credit report regularly gives you a chance to correct any inaccurate information and keep your FICO score up to date, which ultimately affects the affordability of borrowing money to pay for things like your home, your car, or your education.
To order your free credit reports, visit www.AnnualCreditReport.com, call toll-free (877) 322-8228, or mail your request to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.
