John Harun Mwau: What is a Credit Bureau?
Credit reporting agencies collect - and then distribute - all of this information about you. They are information warehouses, and if they have erroneous information your credit can suffer.
What is Credit Scoring?
Credit bureaus have a ton of information. There are hundreds or thousands of lines of information about you in their database, and it's difficult for lenders to sort through all of it. As a result, most companies use credit scores instead of reading through everything in your credit reports.
Credit scores are numbers generated by a computer program that runs through your credit reports. It looks for patterns, characteristics, and red flags in your history. Based on what the program finds, it spits out a credit score.
What is Credit Used For?
Credit was originally used for lending decisions. Nowadays, credit scores and reports are used in other areas of your life. Consumers and lawmakers constantly watch what credit is used for, and figuring out if it's fair or not.
In addition to lending decisions, credit is used for insurance and employment approvals.
There is a lot of confusion around what is credit related information. The most important information used in a credit decision is information from your credit reports and details that you include in an application.
A credit score is just a number. The credit score tells lenders how likely you are to default on a loan. By understanding how credit scores work, you can figure out what lenders are looking for and how you can improve your credit score.
Credit Score Basics
Credit scores are designed to make it easy on lenders. They need to decide whether or not to approve your loan. Instead of manually reading through your credit reports, they can just look at a number: your credit score.
The number is generated by a computer program that reads through your credit reports. It slices and dices the data stored at the credit burea
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