As many face confusion over credit scores and credit reports, national nonprofit outlines specifics to increase consumer understanding.
Boston, MA – April 25, 2014
As some consumers struggle to recognize the role of credit reports and credit scores, American Consumer Credit Counseling offers information to help Americans better understand these two important financial indicators.
Since credit reports impact mortgage rates, credit card approvals, apartment rentals, and even job applications, consumers benefit from knowing what is included in reports. According to The National Foundation for Credit Counseling’s 2014 Consumer Financial Literacy Survey, one in five adults have misconceptions about the types of information included on a standard credit report.
“One of the most common mistakes that consumers make is confusing their credit report with their credit score,” said Steve Trumble, President and CEO of American Consumer Credit Counseling. “Credit scores give a summary of credit history while credit reports offer a detailed and extensive outline. By understanding the details of their credit report, consumers can identify financial strengths and weaknesses as well as take steps towards financial stability.”
ACCC describes a credit report as an organized list of information compiled by lenders that includes records of payment history, payment totals and payment frequency. Companies servicing loans relay information to one or more credit reporting agencies then those agencies combine the information from different credit, loan and payment reports into a single credit file which is compiled into a credit report. There are three nationwide companies that prepare credit files in the United States: Equifax, Experian, and TransUnion.
Credit reports may include:
- A list of companies that have given the individual credit or loans
- The total amount for each loan or credit limit for each credit card
- How often a consumer pays credit or loans on time, and the amount paid
- Companies that have asked to see your credit report within a certain time period
- Personal address(es) and/or employers
- Other details of public record
Credit reports may be checked by the following:
- Mortgage lenders
- Utility companies
- Student loan lenders
- Insurance companies
- Government agencies
- Collection agencies
- Judgment creditors
- Entities that have a court order
“Credit reports reveal all of the ups-and-downs of consumers’ financial history,” said Trumble. “In addition to knowing where you stand, it is a good idea to frequently check your credit report because doing so helps catch inaccuracies or possible signs of identity theft early. Consumers can check their credit report online by using free credit check services at www.annualcreditreport.com. Take advantage of this free service by checking your report at 1 of the 3 credit reporting agencies every 4 months.”
Unlike the detailed history found on the credit report, the credit score is a simple numerical expression based on several pieces of data from an individual’s credit report. A credit score helps lenders and others quickly determine the likelihood that a consumer will repay debt responsibly, based on their past credit history and current credit status. Since credit scores are a dependable and objective measure, they help lenders assess risk in a fair and unbiased manner. Many additional factors are used to determine risk; however, a credit score is the leading indicator of one’s basic creditworthiness.
“Credit scores constantly change to reflect the contents of the credit report, which means that consumers can improve their score,” added Trumble. “By paying bills on time, using credit cards responsibility and keeping a low debt-to-income ratio, consumers can increase their credit score over time.”
A credit score may be checked by the following:
- Credit Card Companies
- Auto Dealers
- Retail Stores
ACCC’s certified and experienced counselors offer a variety of financial education, counseling and debt management services to help consumers achieve long-term financial health and stability. These financial education programs enable consumers to better understand and manage their finances.
ACCC is a 501(c)3 organization, that provides free credit counseling, bankruptcy counseling, and housing counseling to consumers nationwide in need of financial literacy education and money management. For more information, contact ACCC:
- For credit counseling, call 800-769-3571
- For bankruptcy counseling. call 866-826-6924
- For housing counseling, call 866-826-7180
- For more information on financial education workshops in New England, call 800-769-3571 x1980
- Or visit us online at ConsumerCredit.com
About American Consumer Credit Counseling
American Consumer Credit Counseling (ACCC) is a nonprofit credit counseling 501(c)(3) organization dedicated to empowering consumers to achieve financial management and debt relief through education, credit counseling, and debt management solutions. ACCC provides individuals with practical debt solutions for solving financial problems and recognizes that consumers’ financial difficulties are often not the result of poor spending habits, but more frequently from extenuating circumstances beyond their control. As one of the nation’s leading providers of financial education and credit counseling services, ACCC’s certified credit advisors work with consumers to help them determine the best plan of action to get out of debt and regain financial stability. ACCC holds an A+ rating with the Better Business Bureau and is a member of the Association of Independent Consumer Credit Counseling Agencies. For more information or to access free financial education resources, log on to ConsumerCredit.com or visit TalkingCentsBlog.com.