Consumers becoming more credit savvy with new services and resources

The uncertain economy has reminded many Americans of the importance of keeping an eye on their financial health. Fortunately, technology and new federal regulations have made it easier than ever for consumers to keep track of two very important elements of their financial well-being: their credit report and score.

Every consumer has access to their credit report, which can be reviewed for free once a year at In addition they can also purchase their credit report from the three major credit bureaus at any time online. Reviewing your credit report and understanding what “good” credit looks like can feel a bit overwhelming, but resources are available, and whether you choose to spend the time yourself or enlist the help of an expert, the choice is up to you.

While learning what’s on your credit report and how it impacts your score is easier than ever, sometimes understanding that information is not so simple. In fact, more than a third of adults (37 percent) say they don’t know their credit score, and 64 percent have not ordered a copy of their credit report in the past year, according to a 2009 survey by the National Foundation for Credit Counseling.

Times are changing, however, and more consumers are expressing an interest in credit education.

“The unpredictable economy significantly changed consumer awareness and attitudes toward credit,” says Andrew Sheehan, senior vice president for Experian’s consumer information services. “We found more consumers asking Experian for assistance in taking a more active role in understanding their credit.”

Experian responded by launching its Credit Educator service, which provides participants with a one-on-one telephone based education session with a U.S.-based agent. The consumer receives a copy of his or her Experian credit report and VantageScore, as well as a detailed review of each section of the report, a discussion of how credit works, how items on the report affect the credit score, and guidance for maintaining a healthy credit profile.

What’s on a credit report?

A credit report is a snapshot of your financial behavior. It includes identifying information such as your full name, and current and previous addresses. It also contains information about your credit history, like current and past credit accounts, payment history, bankruptcies and delinquencies.

Credit bureaus collect this information from a variety of sources, including banks, mortgage companies, credit card companies and public records. Generally, this information is updated monthly.

How is your credit score calculated?

While it may appear as simply a number, scoring formulas are very complex and take into account a variety of factors to provide a number that summarizes the historical credit information on a credit report. Each of the three major credit bureaus uses their own formula to calculate your score. Generally, credit scores are based on these key factors:

* Your payment history

* The ratio of credit used to credit available

* The types of credit accounts you have (mortgages, credit cards, auto loan, etc.)

* Late payments

* Negative reports like late payments or delinquencies

A credit score is generated at the time of an inquiry, so that it will give the most current snapshot possible of your credit standing.

How can you improve your credit score?

Because there are many different credit scoring systems with different scales, a “good” credit score depends on the scoring system used by your particular lender. However, you can get a very good idea of whether you have a “good” credit score by getting a credit score and report from Experian. If you have a “good” credit score from Experian, you likely will have a “good” credit score with your lender.

The national average VantageScore is 749 (out of a possible 990). VantageScores between 700 and 799 are considered “C” scores, with “B” and “A” scores falling in the ranges of 800 to 899 and 900 to 990, respectively. The higher your credit score, the more likely you are to be able to qualify for credit at better interest rates and terms.

If you want to improve your credit score, paying your bills on time is the single most important thing you can do. Delinquent payments and collections can have a significant negative impact on a credit score.

Maintain low balances on credit cards and other “revolving” lines of credit. Apply for and open new accounts only if you really need them. Pay off debt rather than just moving it around, and once an account is paid don’t automatically close the account. Closing it can lower your ratio of available credit to credit used.