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CREDIT REPORT BASICS

CREDIT REPORT BASICS

A tri-merged credit report which includes reporting from EMPIRICIA at TransUnion, BEACON at Equifax and TRW/Fair, Isaac Model at TRW, the three major credit reporting agencies in the US, is most often used for all FannieMae/FreddieMac loans. Each report will have different information as reporting to them is voluntary and creditors subscribe to whichever agency they want, if any at all.

Credit scores are a way for lenders to quickly evaluate and predict a potential borrower's creditworthiness. It is not a measure of the borrower's income, assets, bank accounts, etc… The credit report is basically divided into four sections:

1-Identifying information: This involves your social security number, name, previous names, your spouses name, your previous address, date of birth, etc…This information is verified for accuracy.

2-Credit history: This shows the name and number of your tradelines. The name of the creditor, when the account was opened and/or closed, what your current payments and balances are, what your maximum credit amount is and if you've paid on time and when and how often you've been late.

3-Public records: Lenders like to see this section completely blank. This is where public records like arrests, bankruptcies, judgments and tax liens would show.

4-Inquiries: Anytime anyone orders a report, even you, it will show here. There are two kinds of inquires. "Hard" inquires are ones you've signed for and initiated it, as if applying for an auto or real estate loan. "Soft" inquiries are when companies want to pre-qualify you for their promotional materials. These "Soft" inquiries will only show-up on credit reports that you order for yourself. Can all these inquiries effect your credit score? The vast majority of inquires are completely ignored by the FICO scoring model. In fact, you have a 30-day buffer period where auto and mortgage inquires are initially bypassed and not counted. It also counts two or more "Hard" inquiries in the same 14-day period as just one inquiry.

Credit scoring: A Fair, Isaac Credit Bureau Score, or FICO scoring is a means of grading potential borrowers based on the likelihood that they'll pay their credit obligations as agreed. Scores range from 300-900 (depending upon the depository) and each of the major credit bureaus score independently of each other based on the FICO scoring system. The higher the score the better credit risk you are perceived to be and as a result the better terms and financing you can expect to receive from a lender.

For more about credit reports see the links below:

Credit Scoring

Credit Reports . . . Understanding Your History

Credit Counseling

Credit and Divorce

Closing Credit Accounts