What are credit scores? Understanding your credit score report is not always easy if you’ve never looked at your credit score before. Based on numbers alone, credit scores range from 300, which is the lowest score, to 850, which is the highest score. The national average is around 732. To qualify for the best loan rates, lenders usually require that you have a 750 rating credit score. Once you have your scores in hand, you’ll also notice there is a wealth of other information regarding your debts.

The main section to look at in your credit scores report is your “Credit History” or “Trade Lines.” Your accounts will fall into 1 of 5 categories: Real Estate (first and second mortgage), Installment (car loan, regular payments), Revolving (credit cards), Collection (seriously past due) and Other. Each account will list the creditor/lender’s name and the account number. Sometimes, more than one account will be indicated on your report from the same creditor, especially if it gets sold off into collection, but only one account should be marked “open” at a time.

You should be able to see when you first started the account, the type of account, the total amount owed, how much you still owe, the status of the account (open, inactive, closed, paid) and how well you’ve paid the account. If it’s noted “charged off,” that means the credit made efforts to collect but gave up. If you see a code like “R1,” then this generally indicates how well you’ve been at paying on a scale of 1 to 9. If you have had any late payments on your account, then you’ll see a little square with 30, 60, 90 or 120 in the box, indicating how late you were.

If you see a green OK and a 0, you’re in good shape with high scores. If you see “charged off,” “bad debt” or “placed in collections,” then your account went 120 - 180 days past due and was sold off to debt collectors. Charge-offs and Debt Collections are bad since these poor credit scores remain on your report for seven years.

More On: Understanding A Credit Score Report

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This entry was posted on Tuesday, October 7th, 2008 at 5:57 pm and is filed under Financial Services. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.