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How to Read and Understand Your Credit ReportMany people see their credit report as some sort of report card about their life.
Many people see their credit report as some sort of report card about their life. Your credit report
doesn't tell any one how great a cook you are, or the type of partner you are or even the type of person. What it does tell people, is your ability to repay debt. Lenders request a copy of your credit report and depending on your grade or in this case your credit score, will decide if they want to lend you money. Which is why you need to request a copy of your credit report every year and go over it thoroughly, then clear up any errors that might be in the report. To begin you have to request a copy of your credit report. In the United States, there are three major credit-reporting agencies:
Experian (www.experian.com; (888) 397-3742)
TransUnion (www.transunion.com; (800) 888-4213)
Equifax. (www.equifax.com; (800) 685-1111) In truth, there are actually over twenty credit bureaus, however, these are the BIG three. By Sept. 1, 2005, all Americans were eligible and entitled to receive one free credit report from each of the main credit reporting agencies per year. However, theses reports will not be sent out automatically. YOU have to request your copy of your report. You have several ways of requesting a copy of your report: Go to www.annualcreditreport.com. This is the only authorized source for consumers to access their annual credit report online for free. You can either contact them at (877) 322-8228 or complete the form on the back of the Annual Credit Report Request brochure, then mail it back to:
Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA, 30348-5281 You have the choice of ordering your credit reports from the three top credit bureaus all at once or you can space them out throughout the year, by ordering one at a time. Whichever way you choose, make sure that you order them from the centralized agency. If you go directly through the credit reporting agencies, you will be charged a fee unless you fit another criteria for receiving a free credit report. If you need or want to review your credit reports more frequently, than you can order them from the credit reporting agencies either through their Web sites, or phone. Costs do vary from state to state. A word of advice, reviewing only one of your credit reports is practically useless. Because creditors are only required to report to only one credit bureau, the reports can and most often do contain different information, depending on which agency the creditors subscribe to -- if any at all. In addition, the credit bureaus do not verify the information the creditors send them. They just report it. Therefore, if your name is spelled wrong, or if your social security number is wrong, it is up to you to correct these errors. This also includes any other errors that you may discover.
It is also vital that you order your credit report directly from the credit bureau instead of having a friend who works in the billing department of a car dealership or store to generate one for you. Credit reports that car dealerships, stores, and even banking institutes receive are written for the individuals in those industries, not for the consumer. Whereas, the credit report that you request from the credit bureau is designed and written for
youth consumers.
Before anyone of you reading this article start shouting conspiracy, no, this is not the case. The information contained in both reports is the same, however, the report that you receive is written in a consumer-friendly manner, simply because not every one has a masters degree in accounting, business, and understand the ins and outs of finances. Your credit score or FICO score is named for The Fair Isaac Corporation, the creator of scoring system that is used to determine a person's credit risk. To understand your credit report you first have to understand how this three-digit number is generated.
Your credit report is divided into four sections:
Identifying information this is information that identifies you. Therefore, you should closely examine this information to make sure it's accurate. It's not unusual, to find your name to be misspelled, or your Social Security number wrong some where. This is because someone reported the information this way. Other information may include past and present addresses, your date of birth, telephone numbers, driver's license numbers, your employers, as well as your spouse's name. If there is an address that
you've never resided at, contact the bureau immediately as this could be an indication of identity thief. Credit history -- the individual accounts are sometimes referred to as trade lines. Each account should include the name of the creditor as well as the account number. The account number may or may not be scrambled for security purposes. In addition, you may have more than one account from a creditor. The reason for this is that many times, if you move, creditors transfer your account to a new location or region and then assign you a new number. The information contained in your credit history includes: The date you opened the account
The type of credit, whether its an installment credit line (mortgage or car loan), or revolving (bank and department store credit card)
Whose name the account is in and if the account is a joint account, meaning in your name alone with another person
Credit limit
How much is still owed
Fixed monthly payments or minimum monthly amount
Account status (open, inactive, closed, paid, etc.)
Payment history, which is how well you make your payments on time or late
If you look at your Experian report, you will notice that the payment history is very understandable, stating that you are -- never pays late, usually pays 30 days late, and so forth. Other comments could include internal collection and charged-off or default. When a creditor sees Charged-off on a credit report it means that the creditor simple gave up. They made every effort to collect the money owed them, and have finally just written it off. Other credit reporting agencies use payment codes, which range from 1 to 9, making them a littler harder to understand. If you have an R1 or I1 on your report, this indicates a good payment history. Public record this section should be blank. If the public record has a notation, then you have had a serious problem. Public record means that you have had bankruptcies, judgments, child-support orders, tax liens, and other financial legal information. Inquiries This is a list of companies who have requested to see your credit file for either a promotional reason such as an introductory low rate pre-approved credit card, or in response asked to you requesting new or additional credit. Special NOTE: Companies who request your report for promotional reasons will not appear on the credit report that prospective creditors receive, however, they will appear on the copy that you request. Inquiries are divided into "Hard" inquiries, which are ones you initiate and "Soft" inquiries, which are initiated by companies wanting to send out promotional information, or by current creditors monitoring your account. The FICO score counts two or more "hard" inquiries in the same 14-day period as only one inquiry. Once you receive your credit reports, carefully go over them. If you discover any mistakes on your credit report such as an account, which isn't yours, a disputed amount, an address that youve never resided at, then you need to complete the form that comes with your report and follow the instructions on the explanatory sheet. The creditors have 30 days to respond to any charge of discrepancy. Keep in mind, that as long as a charge is in dispute, it will continue to appear on your report. Dont feel as if you are the only one that has mistakes on their credit report, experts say that an estimated 80% of all credit reports have some kind of misinformation on them. This is why you must go over your report and correct any mistakes.
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