Checking your credit report once a year or before a major transaction is  always a good idea.  You will want to make sure that all information on the credit report is accurate and up-to-date.  Checking your credit score is also a good idea.  Keep in mind that your credit report score may vary from source to source.  In mortgage loan transactions, for example, it is not uncommon for a credit lender to get credit scores from all three credit bureaus and use the middle or the lowest credit score of the three.   To get your Free Credit Report click on one of the links above or continue reading for additional tips for your Credit Report:

There are two ways lenders decide whether an application gets approved:  judgmental evaluation and credit scoring.  In a judgmental system, the lender looks at each application individually.  Credit lender will have guidelines to follow and will take into account factors such as your income and credit history, but may also consider individual circumstances when reviewing your mortgage application.   In other words, the lender may use its own judgment within expectable guidelines when deciding whether to approve the loan.

The other way to evaluate loan applications - credit scoring - is a way for lenders to predict statistically how risky it is to lend money to someone.  Credit scores are created by  taking a set of credit data - information in a particular lender's customer base, or a group of credit report.  Credit lenders try to figure out what factors people who pay their bills on time (or don't file bankruptcy have in common.

The credit scores are so accurate in predicting behavior that many times your credit report application are analyzed entirely by computers and your loan application is given either approval or denial depending on your Credit Report score.

You may have heard of the FICO Score created by the big payer in the business.  Fair Isaac Company.  While FICO is the main developer of scores, they are not the only company to create scoring systems.  In addition, it is not unusual for the mortgage lenders to customize their credit scores based on their own experience with customer's credit reports or they can use different credit scores for different purposes.  Still, using the general guidelines of FICO score can be helpful in understanding how credit scores work and how to improve yours.

       What's in Credit Report?

Information in a credit report will typically most heavily influence your credit score,  through information from your loan application may also be included in some scoring models.  Here are the main components of a credit report as FICO breaks them down:

Payment History:

This is one third of your your credit score.  Here, lenders look at whether you have paid your bills on time.  It includes whether you have past late payments, judgments, bankruptcies, or other negative marks.  Recent late payments can be a particular red flag to loan lenders.

Amount  Owed:

This makes another third of your credit score.  Having debt isn't a credit score killer.  Mortgage lenders just want to make sure you don't have too much debt.  They look how much debt you have, what types of accounts carry balances, and how many accounts have balances.

Because of the way credit report is compiled, loan lenders generally won't know if your pay your bills in full each month.

Other Factors:

Other Factors will play a less important role in determining your credit score but still contribute to it.  These include:

            Inquiries - how many times your credit report has been accessed by potential lender when you apply for a credit.

            Length of Your Credit History - A long stable credit history is good for credit report scoring systems.  Loan Lenders usually look at how old your oldest account is as well as how old are your credit accounts on average.

             New Credit - Most credit report scoring systems do look at how many new accounts you have and how many have balances.

             Age - Can be considered in credit report scoring system, but lenders can't discriminate against anyone who is 62 years old or older.