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Credit report scoring glossary of terms, part 3
Still more things you should know about your credit history
Your credit report can be a big mystery if you aren’t sufficiently familiar with the language of the financial industry. In part three of this glossary of credit terms, we will examine more things you ought to know about finance.
Continued below
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Your credit report can be confusing. Here are more things you should know
In parts one and two of this glossary of credit terms, we examined a few basic terms that you should know when dealing with financial institutions, credit reports or lenders. It’s a long list, but one that’s worth knowing if you regularly want to keep tabs on your financial health. Terms we previously covered included things such as credit reports, bureaus and scores, the FICO scoring model and delinquencies, defaults and judgments. Such things are, fortunately, not normally encountered by people who pay their bills on time or in full, but they do pop up from time to time.
Here, in the last of this series, are some other terms you should know about credit reports:
- Public record - Not a criminal record, but information gained from public sources that is noted on your credit report. Judgments, bankruptcies and tax liens are the sorts of things that might constitute a public record notation on your credit report. These are not good things to have. Ever.
- Revolving credit - A line of credit that has a fixed limit that can be renewed as you pay it back. At any given time, you may be charged interest on the unpaid balance. If you have $1000 in revolving credit and owe $500, interest may be charged on the $500 you owe. If you pay it back, you have $1000 in credit remaining.
- Soft inquiry - Unlike a hard inquiry, which can affect your credit score, a soft inquiry is one made by a lender who is “just checking.” It is not an inquiry as a prerequisite for a loan, but may be done as a prerequisite for sending one of those “preapproved” applications you get in the mail. It may also be a query made by someone with whom you regularly do business, such as the light company. While noted on your report, soft inquiries do not affect your score.
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The list of things that you need to know to manage your credit report is a long one. Most of these terms are not frequently encountered, and if you don’t have any judgments, liens, delinquencies or defaults noted, you are that much better off for it. Your credit report is an important component of your financial health, as every single financial transaction of note in your life will be indicated on it. This is useful to lenders, who want to get a good idea as to what sort of person they are dealing with, but it can be bad for you if the information is either incorrect or correct but not too flattering. By checking your report regularly, you can keep an eye on any potential mistakes or clear up any delinquent accounts you might have. By doing so, you can be assured that the best available loan terms will be available to you in the future.
Failing to do so could mean that you will have to pay more than you should any time you apply for a loan in the future, and that would be a costly mistake.
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