Inquiring minds want to know. Right?
How do these bureaus get our purchasing history? If you were to write down every single thing we buy, borrow, lease, etc. on pages, you'd call it a financial diary. So who is writing those pages? Of course, we are, but someone else is writing all of this down, too - credit bureaus and entries to our credit report.
How do "they" compile our financial diary?
Almost every time you buy something, or create any kind of financial transaction, it is likely being reported to one, two, or all three credit bureau agencies: Experian, TransUnion, and Equifax. In other words, from retailers to landlords, this information is sent to them for free.
These credit bureaus compile this information and create credit scores on us using an algorithm. Generally, the methodology used to create the number score is "Fico". That's why you hear the phrase: "I have high Fico Scores" or "my fico scores stink."
Why do they do this?
When you apply for a credit card, a loan, a mortgage, and possibly even apply for a job, these companies want to know what type of financial risk you represent to them. They buy this credit information and make the decision as to whether to loan your the money to complete the transaction.
Note: these businesses also often use this information to determine what type of interest rate to charge you. Down to earth translation? the higher (better) the fico scores/reports, can translate to lower interest rates, which means less of a cost to you.
The Bottom Line?
4 Big Links:
There is no time like the present. Don't you hate that phrase? I wish it weren't true, but well, that phrase is so true here. Go ahead, right now, and get moving on checking your financial diary!
Remember when we were little and perhaps kept a diary that we'd tuck under your bed or something so "mom" wouldn't read it? Well, oddly enough, your mom is just about the only person, it seems, that can't read our financial diary.
There are ALL kinds of people peering into our financial life. Wouldn't it be nice to know what they are seeing?
You CAN Have Success in the Middle of it ALL
The JellyGeneration Team
Pam Hardison, MBA, BBA in Finance and Business Education, has created and co-owned a national mail order catalog which at one point was the 21st fastest growing customerbase in the nation. As a mom of two college-post college daughters, considers it a privilege and to meet other students and parents along the same road. After teaching high school and college students for years, her commitment to helping them with topics most schools can't cover is the light that drives her.
Holly Powers, Attorney-At-Law (Jameson & Powers, P.C.) has been actively practicing law since 1985 and is a shareholder with the law firm of Jameson & Powers, P.C. The firm specializes in transactional law, health care law, and general business law. Holly has taught students precepts concerning the legal world for over 10 years. With 4 children, she understands what teens need to know and has a passion to help others faced with teens and aging parents.
Join us and other parents just like you, ready to learn all the latest in reaching their young adult with vital information to help them launch as successfully as possible.
Don't worry, your information will not be shared.
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