Credit Reports and Scores

• Your creditors submit regular reports to the credit bureaus, Experian, Equifax and TransUnion. The credit bureaus then compile these reports into a credit file in your name. Every time you make a payment to your current creditors, open up a new account or pay off a debt, this information appears in your credit report.
  
  Your credit score is a number that represents your lending risk. Although several types of credit scoring methods exist, most businesses rely on the FICO score developed by the Fair Isaac Corporation when evaluating consumer credit records. FICO scores range from 350 to 850 with higher scores indicating a lower lending risk.
  
  

Credit Inquires

• Whenever your credit report gets pulled for review, a credit inquiry noting the review appears within your file. The credit bureaus categorize credit pulls as either "hard" pulls or "soft" pulls. Hard pulls, such as those performed by mortgage lenders and credit card companies, have a slight negative effect on your credit scores. Soft pulls, such as those employers perform or that occur when you review your own credit, do not affect your credit scores.
  
  

Credit Monitoring

• The Fair Credit Reporting Act gives each consumer the right to pull and review one free copy of his credit report each year. By taking advantage of your right to periodically pull and review your credit reports, you can identify credit errors and incidents of potential identity theft that adversely affect your credit scores and take action to correct the problem.
  
  

Fixing Errors

• Credit reporting is not a flawless process, and information providers sometimes report inaccurate information to the credit bureaus that then appears on your credit report. The FCRA gives you the right to file a formal dispute with both the information provider and the credit bureaus in order to have the error investigated and corrected. You can file a dispute with the credit bureaus by phone, by mail or online.
  
  

Maintaining Good Credit

• While paying all of your bills on time helps you maintain a good credit history, timely payments are not the only factor that influences your scores. You can build a higher credit score by keeping the balances you owe low and maintaining both installment accounts, such as loans, and revolving accounts, such as lines of credit. Maintaining active accounts for long periods of time also boosts your credit scores, since the age of your oldest account determines the length of your credit history which, in turn, accounts for 15 percent of your overall credit score.