6 Credit Definitions You Must Know

Poor credit and unsteady financial standing can make many aspects of your life much more difficult than they need to be. Your credit follows you wherever you go, and it can affect your ability to get a job, rent an apartment, or secure new lines of credit. For this reason, it’s important to prioritize your credit health and always make sure your finances are in the best order that they can be.

As a consumer, it’s important to educate yourself on all of the financial aspects that affect your credit. Make sure that you’re aware of how your open accounts will increase or decrease your credit score and how certain financial mishaps are reflected on your credit report. Certain occurrences like a vehicle repossession, late payments, or a defaulted account will result in negative marks on your credit report. These types of negative marks can remain on your report for many years. Take the following steps:

Learn these 6 Important Credit Definitions.

1. Credit Report:  A credit report is a statement that has information about your credit activity and current credit situation such as loan paying history and the status of your credit accounts.

2: Credit Bureau: The three main credit bureaus are Transunion, Experian and Equifax. Credit bureaus collect data from lenders and creditors and provide reports to the consumer, and to prospective lenders.  The reports show a consumer’s payment history and amounts owed on credit cards, mortgages, auto loans, etc.

3. Credit Score: A credit score is based on credit history – the number of open accounts, total levels of debt, and repayment history, and other factors.  Lenders used credit scores to evaluate the probability that an individual will repay loans in a timely manner.

4. Hard Inquiry: A hard inquiry, or “hard pull”, occurs when you apply for a new line of credit, such as a credit card or loan.  It means that a creditor has requested to look at your credit report to determine how much risk you pose as a borrower. Hard inquiries show up on your credit report and can affect your credit score.

5. Soft Inquiry: A soft inquiry occurs in cases where you check your own credit or when a lender or credit card company checks your credit to pre-approve you for an offer.  Soft inquiries do not impact your credit scores.

6. Debt-to-Income Ratio: A Debt-to-Income Ratio is all your monthly debt payments divided by your gross monthly income.  This number is one way lenders measure your ability to manage the monthly payments to repay the money you plan to borrow.

Check your credit reports regularly.

Ensure that all information on your credit reports is accurate and up to date by checking your reports regularly. All consumers are entitled to one free credit report each year from each three of the credit reporting bureaus.

Set Goals to Improve your Credit.

Determining benchmarks to improve your credit standing over time.

Seek Legal Help

Flitter Milz is a nationally recognized consumer protection law firm that represents victims of abusive collection tactics, wrongful vehicle repossessions and credit reporting privacy and accuracy issues.  Contact Us to discuss your consumer credit concern.