When you are getting ready to borrow money, regardless what it is for, you will likely hear the words credit reports. There are several things to know about your credit report, some you may know, and some you just might know about. Here are 5 that we don’t think you may have known.
1. Close to 26 million Americans don't have a credit score
Are you one of the approximate 26 million Americans don't have a credit history that generates a credit score? This is the last count according to a 2015 report by the Consumer Financial Protection Bureau.
Without a credit score or a credit history to generate a good credit report, you will have a tough time obtaining financing today. The days of walking into the bank, shaking the bankers hand, and promising to pay are over. Everything comes down to the credit report and for some, that dreaded credit score.
Whether it's getting a new car, being approved for a credit card, or buying a home, if you don't start building credit now, you'll have a hard time reaching your goals. There are several strategies and tools out there like Experian Boost that can help you take control of your credit score, start building a credit history, and improve your finances.
2. You may have to have a certain credit score to get a job.
Yes some jobs are requiring credit scores now. They have studied the data and have found that when requiring a certain credit score, they get a better candidate for certain positions in return. So how can you use this information as a helping tool? Learn all you can about credit scores, credit report, and how it all works.
What about a potential employer checking out your social profiles like Facebook and Instagram? How about checking your credit? Some employers will search your credit score when you're applying for a job, especially for roles in which you'll be handling sensitive information. Some of these jobs can include military jobs, accountants and financial partners, law enforcement and government roles, prison workers, lawyers, and even casino jobs.
3. Credit reports were introduced in 1989
Fair, Isaac, and Company - now known as FICO® - began standardizing the algorithm for scoring people's credit in the late '80s in an effort to replace these biases with fairness. The system has remained mostly unchanged since the overhaul.The credit report as we know it today is nearly 35 years old. But before 1989, there wasn't an unbiased structure for evaluating people's credit fairly. Thus, many people were often denied credit by a system that was inconsistent and unfair.
Fair, Isaac, and Company - now known as FICO® - began standardizing the algorithm for scoring people's credit in the late '80s in an effort to replace these biases with fairness. The system has remained mostly unchanged since the overhaul.
4. Credit scoring algorithms came before credit scores
Long before the age of algorithms from big tech companies like Facebook and Google, credit reporting agencies were using algorithms to give credit scores to U.S. citizens. So yes, before Facebook, and Tik Tok came the credit scoring algorithms.
As demand for credit products grew among the three big agencies - Equifax, Transunion, and Experian - the difficulty of interpreting the reports they created and comparing them against each other became more apparent. The agencies partnered with tech firm Fair, Isaac, and Company (known today as FICO®) to standardize the credit scoring algorithm.
5. Checking your score doesn't hurt your credit
Top loan officers hear this at a minimum 100 times a month. “I don’t want you checking my credit score, it will go down.”
Checking your credit report will NOT harm your score, IF you do understand how and when it affects your score.
After the initial pull (first time someone pulls your credit) during the last 30 days or so in the same genre of shopping (auto, mortgage, etc) you are able to have other lenders pull a credit report without having any reduction to your credit score. The initial pull, a hard inquiry only knocks your score down by a few points and is typically a requirement to get things started for an accurate interest rate quote.