These days, credit scores affect almost everything we do, including rates on mortgages, auto loans, and credit cards to the ability to get a job. That is why it is essential that we understand what a credit report is and what factors can affect this report. It is also important to understand your credit score and how that number is viewed by a lender.

A credit report and score is a snapshot of how high of a risk you are to a lender. The most widely used credit score is the FICO, which ranges from 300-850. This system was created by the Fair Issac Corporation and is used by the majority of lenders in determining consumer credit scores. There are also many other credit rating agencies that sell “educational scores” that the industry somtimes refers to as “FAKOs”, meaning a fake FICO score. For example, Experian offers their own PLUS Score and TransUnion sells a Vantage Score, which ranges between 501-990. These scores can sometimes differ from the FICO score by 20 points or more and have completely different ranges, so it is very important that you know kind of score you are actually looking at and to make sure that it is consistent with the score your lender would use to qualify you for a loan.

Ultimately, it is recommended that you review your credit report at least once a year and determine what you can do to improve your score to ensure that you are not considered a high risk as a borrower. Read more on understanding your credit score.

If you are curious what is on your credit report, check out this free trial offer to view your credit report and score.

Why would an insurance company care about credit reports? The answer is actually simple but definitely controversial. Insurance companies want to determine whether you should have a low rate or a high rate on your insurance. In fact a study referenced in the below article actually cites that 92% of the largest auto insurance firms used information in credit reports to write new policies and 52% used it to determine rates.

Concerned by how your credit report is being used? You should be. Really, it just puts more emphasis on your credit report and ensuring it’s going to give you high marks on your credit worthiness report card. Read about insurance company and credit reports.

While legislation may take years to reverse how insurance companies can use your reports, you view your credit report in just minutes. If your not sure what’s on your credit report, check out this free trial offer to pull your credit report.