Your credit report statistics shows what your credit score is. Your credit score isn’t stored with your credit report, but it is generated at the time when there is a request to your credit report.

Why credit scores are used?

At the time you apply for a loan the credit score effectively tells the lender based on a score rating, your ability to repay the loan based on your previous payment history, and your current credit status. Everyone from banks, auto dealers and mortgage companies utilize this method of credit rating to determine the risk.

There are other factors when applying for a loan or purchasing a car that includes an applicant’s income, length of employment etc. Many times additional household income is taken into consideration as well. The purpose many times for this is to account for the possibility of a co-applicant being added to the loan should the primary applicant’s credit history or score or length of employment fall short of meeting the requirements for the loan.

What can impact a credit rating or credit report?

The number of late payments made to a creditor.

Charge-off accounts.

These are accounts where payments were discontinued by the borrower leaving a remaining balance that was never paid off.

The total amount of debt. Inquires made recently against your credit.

This can be a flag to a lender if there are a great deal of inquiries on a person’s credit report suggesting to the lender that the applicant is making a great deal of attempts for a loan and can be increasing their debt in the very near future. This will affect the Debt to Income ratio as well as the credit score that many lenders consider, and this can result in a delayed or declined application.

There are regulations in place that protect individuals from the type of information that can be used in evaluating a person’s credit worthiness. The Equal Credit Opportunity Act does not permit race, color, religion, national origin, gender, age, marital status or receipt of public assistance to be used as any determining factors.

As always remember credit is a liability and the best practice is to apply it wisely.