Understanding Your Credit Report and Credit Score

Written by B.Denesia   // September 23, 2011   // 7 Comments


Educating yourself on the ins-n-outs of your credit report is a worthwhile action to take.  Whether you are renting an apartment, buying a house, applying for a credit card, or looking for car insurance your credit score and profile will be an indication of your financial stability, and how risky it will be to lend you money.

First step: get your free annual credit report from each credit bureau to evaluate your situation so there are no surprises.  You are entitled to a free credit report from TransUnion, Equifax, and Experian once a year so don’t be fooled by the paid sites that will give you the same information.

Your credit score will be the first indicator of your credit worthiness.

FICO (Fair Isaac Corporation) put together a calculation that determines your scores.

Scores range between 300 and 850, with 850 being the best credit score possible.  Bills.com put together information provided by FICO for credit score and formula for your FICO calculation.

Excellent: Over 750

Very good: 720 or more

Acceptable: 660 to 720

Uncertain: 620 to 660

Risky: less than 620


Formula for FICO calculation:

35% on your payment history

30% on the amount you currently owe lenders

15% on the length of your credit history

10% on the number of new credit accounts you’ve opened or applied for (fewer is better)

10% on the mix of credit accounts you have (mortgages, credit cards, installment loans, etc.)


Here is a chart that shows distribution of credit score in 2011:

So your score is calculated for lenders to assess what kind of risk they will be taking on when lending you money.  So the better your score, the less risky you are to lend to.  If you are a less risky borrower, you will ultimately end up with much better interest rates.  This could end up saving you 10’s of thousands of dollars when it comes to a mortgage loan over 30 years, or any other type of loan you may be looking to obtain.


When looking at your report for items that negatively impact your score, you may see accounts that are past due.  In this example you can see that there have been 7 – 30 day lates, and 3 – 60 day lates.  Tightening up your budget and making more than your minimum payment to these types of accounts and getting them on track to where you are only using 50% or less of your credit limit will help move your score in the right direction.


After obtaining copies of your reports, you should check for inaccuracies.   If you find that there are errors on your report, it is important to dispute these items to improve your credit standing.   In an article on the New York Times Bucks blog, Tara Siegel breaks down the process of disputing erroneous information on your credit report.  This is a good resource to learn the process of disputing errors on your report.

As a good credit rating will ensure better interest rates and more options when applying for credit it is important to know where you stand and the steps necessary to improve your credit standing.


  1. By Mark Chen, February 23, 2019

    I like to pull just one of the three credit bureau reports at a time, every four months. That way, I can view a free report three times a year, instead of pulling them all at once and then having to wait 12 months for my freebies.

  2. By dolrdolrbill, February 23, 2019

    Very intuitive. Sounds like you do your homework Mr. Chen.

  3. By John Dough, February 23, 2019

    Checking your report three times a year like Mr. Chen suggests is a great way to stay on point regarding activities. My brother-in-law was recently the victim of identity theft and realized it during his yearly credit check and finding discrepancies there. Not only is it a valuable tool for monitoring your score, but also a great indicator of your credit and spending habits. Thanks for the article.

  4. By Salley Saver, February 23, 2019

    Will it affect my credit score if I apply for credit report more than once a year?

    • By dolrdolrbill, February 23, 2019

      If you personally pull your report more than once a year, it is harmless. If you are inquiring about a mortgage loan, personal loan, or apartment: this can impact your score a bit each time you do so.

  5. By Tax-y Lady, February 23, 2019

    I do think it is important to note that while we get the free credit reports from each of the credit bureaus each year, these reports do not come with your credit score. The bureaus charge you to give you that information. You can get a pretty good estimate of your score using your credit report information and any of the various calculators available.
    But if you are denied a loan or turned down for an apartment application, etc. you may be entitled to a copy of the credit report (usually including the score) that the lender used to make their determination. If this happens- follow the process and request your copy. They don’t usually just give it to you unless you ask clearly for it. But (unsolicited advice here) don’t apply for loans or credit you don’t need just to get your score. You can hurt your score by doing so.

  6. By Mike C., February 23, 2019

    The the credit bureaus are among the worst kind of scammers. My credit report has countless errors — accounts I never opened, apartments I never rented, etc. I’ve tried to correct these errors several times over the years but the agencies place ridiculous burdens that have made it impossible to get them corrected. They make it nearly impossible to talk to a real live human, and in the few occasions I have talked to representatives at the bureaus they have been incredible rude and uncaring about the fact that they’ve made huge and repeated mistakes that hurt my credit. They don’t even try in the least bit to help. So I’ve given up. I’ve don’t owe a single penny to anyone on this planet and paid back on-time everyone whose ever lent me money, yet these heartless and unethical people at the bureaus give me (or rather, some imaginary me who owes money on accounts I never opened and rented apartments I’ve never rented) a score of 500? The heck with them. I give them a score of zero.


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