Debt Management and Credit Scores

There is so much information (and misinformation) out on the net about credit scores. Some people are under the impression that a credit score and a credit report are one and the same thing. That is wrong. They are two entirely different things.

The credit SCORE is based upon the credit REPORT. Credit scoring is just a simplified method of identifying good credit risks from poor credit risks. You can bet that lenders will get a credit SCORE before they proceed with the loan process but before a loan process goes very far, the lender will get full credit reports and from all three of the credit reporting agencies.

The credit score is based only upon credit history. The things that determine a credit score are whether payments were made on time and in full as well as on other things that are contained in a full credit report like employment history and income level. Points are awarded for each of these things as well as many others.

You might say that the credit score is a snapshot of a credit report -- a summation, if you will, that gives lenders a good idea of whether an applicant is a good or bad credit risk.

Some people believe that if they stay out of debt and pay in cash as they go, they will have a good credit score and a good credit report, but that is just wrong. They will have no credit history, no credit score, and no credit report. All of these things are based upon credit -- payments of loans and debts. You must have been granted loans by banks, or you must have a credit card payment history, in order to have a credit score or a credit report.

The fastest (and least expensive way) of building credit history is to get a credit card, make charges, and then pay them off before any interest is added.

Milos Pesic is a professional Debt Management consultant who runs a highly popular and comprehensive Debt Consolidation web site. For more articles and resources on debt management, debt consolidation programs, free debt counseling and much more visit his site at:

=>http://debt.need-to-know.net/

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