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Credit histories and credit reports are issued by businesses known as credit bureaus. The most prominent credit bureaus are Equifax, Experian, and TransUnion. They each gather information from a person’s bank(s), credit card issuers, automobile finance companies and public information resources such as property and court records. The three firms are independent from each other and rely on different sources for their reporting. Because the credit bureaus differ in sources to compile their reports, the content of one credit bureau’s report may not be identical to another.

Mark Dunsmoor, senior vice president of Legacy Bank suggests that people check their credit reports at all three credit reporting bureaus annually and immediately dispute any errors. “The FACT Act (Fair and Accurate Credit Transactions Act) stipulates that each legal U.S. resident is entitled to a free copy of his or her credit report from each credit reporting agency once every 12 months,” cited Dunsmoor. Since incorrect information on a report can negatively impact your credit score, a yearly checkup is a smart way to stay on top of your results.

Be clear however, that credit reports and credit scores are not the same thing. “Your credit score, often referred to as your FICO score, is a number calculated by a credit bureau as a measure of your creditworthiness,” comments Dunsmoor. “Credit score is determined by using a commonly accepted formula developed by Fair Isaac Corp. (FICO) and based on the credit information that the credit bureau has compiled.”

Scores range from 300 to 850. A score below 650 is often considered a problem while an excellent score is considered to be 750 or above.

Your FICO score may vary from one credit agency to another for several reasons. Reports may have been produced on different dates or the credit bureaus used different FICO scoring models. Some lenders provide information to all three major credit agencies while others do not. If you are seeking credit and your score differs greatly from one agency to another you should check into the basis of each score.

According to Dunsmoor, there are three steps you can take to maintain a positive credit report and FICO score or improve either if need be. “First, pay your bills on time including credit cards, loan payments, mortgage payments, and similar charges,” said Dunsmoor. “If you’re behind on any payments, bring them current as soon as possible. Late or missed payments appear as negative information on your credit report for seven years.”

Second, Dunsmoor says keep credit card balances small to maintain a low credit utilization ratio. “Credit ratio is calculated by adding all your credit card balances at any given time and dividing that amount by your total credit limit,” adds Dunsmoor. “For example, if you typically charge about $2,000 each month and your total credit limit across all your cards is $10,000, your utilization ratio is 20 percent. Lenders typically like to see low ratios of 30 percent or less. This does not mean you cannot use your full credit limit, it is just important to be cognizant of the balance at the end of the statement cycle to determine your credit utilization. ”

Finally, be mindful of the accounts you are opening and/or closing Canceling unused credit cards with no annual fees may increase your credit utilization ratio.

Mark Dunsmoor is a senior vice president at Legacy Bank and has 40 years of banking expertise. He has been recognized by Greater Pueblo Chamber of Commerce which presented him with the Charles W. Crews Business Leader of the Year.

Article featured in the Pueblo Chieftain: Link to Article