Understanding Credit Scores
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Understanding Credit Scores

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Questions and Answers

What is a significant factor that contributes to the calculation of a credit score?

  • Household size
  • Details about your checking account
  • Loan payment history (correct)
  • Social media activity
  • How long do financial records typically remain on a credit report?

  • 1-2 years
  • 12-15 years
  • 3-5 years
  • 7-10 years (correct)
  • What does the Equal Credit Opportunity Act prevent?

  • Giving loans to everyone equally
  • Denying credit based on race, sex, or religion (correct)
  • Charging high interest rates
  • Offering free credit reports
  • Why is it beneficial to review your credit report from all three agencies?

    <p>They each report slightly different data</p> Signup and view all the answers

    What is a potential drawback of services that promote a 'free credit score'?

    <p>They might charge for updates</p> Signup and view all the answers

    What is the scale for minimum to maximum possible credit score?

    <p>300 - 850</p> Signup and view all the answers

    Do you ideally want to have a HIGH credit score or LOW?

    <p>High, it helps get better loans and interest rates</p> Signup and view all the answers

    What information is NOT included in your credit report trade lines?

    <p>Checking account balance</p> Signup and view all the answers

    What percent of Americans know their credit score?

    <p>About 58%</p> Signup and view all the answers

    What is a 'Thin File' in terms of credit?

    <p>A credit report with little credit history</p> Signup and view all the answers

    If you miss a payment with a 750 credit score, how will it impact you compared to a 650 score?

    <p>Less impact with a higher score</p> Signup and view all the answers

    Where can you get a free copy of your credit report?

    <p>AnnualCreditReport.com</p> Signup and view all the answers

    Why should you review your credit report regularly?

    <p>To check for accuracy</p> Signup and view all the answers

    Study Notes

    Credit Scores

    • Credit score range: 300 - 850
    • Higher credit score is better as it helps you get better loans and interest rates
    • Lenders use credit reports to determine creditworthiness and risk
    • Credit reports contain information on your payment history, loan balances, account opening dates
    • It does not include checking account balances
    • Reviewing your credit report regularly helps monitor factors affecting your credit score and check for accuracy
    • Only about 58% of Americans know their credit score
    • "Thin File" refers to a credit report with little credit history
    • You can get a free copy of your credit report at AnnualCreditReport.com

    Impact of Credit Scores

    • Missing a payment has more impact on a higher credit score than a lower score
    • It is advisable to request your credit report from all three agencies to ensure accuracy as each agency may have slightly varying data
    • Financial records generally remain on your credit report for 7-10 years
    • An 18 year-old typically has a thin credit file because they are just starting to build credit
    • Some services offering "free credit scores" may charge for updates
    • Some credit card companies offer free credit scores to boost cardholder loyalty

    Credit Reporting Laws

    • The Equal Credit Opportunity Act prohibits denying credit based on race, sex, or religion
    • It is important to review your credit report from all three agencies as they each report slightly different data
    • Lenders check the credit accounts section of your credit report to evaluate your financial history

    Loan Considerations

    • When lending money to someone you do not know, it is important to understand the purpose of the loan and their monthly expenses
    • Loan payment history is included in your credit report

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    Related Documents

    Credit Score Quiz PDF

    Description

    Dive into the world of credit scores and understand their importance for borrowing. This quiz covers key concepts related to credit reports, score ranges, and the significant impact of payment histories. Learn how to monitor and improve your creditworthiness effectively.

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