Understanding Your Credit Report

Just What Is A Credit Report?
Establishing a good credit report is just about the most important thing you can do to insure that you can procure a home or personal loan at a reasonable interest rate whenever you need it. Whether you are planning on purchasing a new house, thinking about refinancing your present home, about to lease your first apartment or purchasing a car, it is important that you know what your credit report says about you and your financial past.

Your credit report contains information regarding your bill-paying history, credit cards you have, if you’ve ever been sued or arrested or if you have filed for bankruptcy. Consumer reporting companies send the information contained in your report to creditors, insurance companies, prospective employers and other business that have a legitimate need for it. As you can clearly see, your credit report is the permanent record of your financial life.

How Credit Scores Are Determined
Credit scoring uses a numerical system for creditors to determine whether to extend credit to you. Your credit score also helps determine what interest you will pay on any new or refinanced loans. Your outstanding debts, number and types of accounts that you have, late payment history, collection agency actions and other financial information make up your credit report. Using a statistical formula, creditors compare this information to the credit information of consumers with similar profiles to yours. This credit scoring system awards points for all relevant financial factors. The total points, your credit score, helps predict how good of a credit risk you are perceived to be. This number determines how likely it is that you will repay any loans in a responsible manner. Consumers who have high credit scores are nearly always good credit risks. Click here for credit management tips.

How to Correct Information That Appears in Your Credit Report
Under the Fair Credit Reporting Act, the consumer reporting company and the information provider are both responsible for rectifying any incomplete and/or inaccurate information that appears on your credit report. If you discover information on your credit report about your financial history that you feel is either inaccurate or incomplete, you must contact both the reporting company and the information provider. You need to do this in writing and you must include copies (not originals) of any documents that support your position. Your letter, which should be sent via certified mail, return receipt requested (forms are available at your post office), should clearly identify each item in your credit report that you are contesting and why you are disputing them. It is very important that you keep copies of all transactions.

Consumer reporting companies must investigate your claim within 30 days, unless they deem your dispute frivolous. They must then send all of the pertinent data to the organization that first provided the information. At that time, the information provider must investigate the claim and report the results back to the consumer reporting company. If the information provider agrees that the disputed information is, indeed, inaccurate, it must notify all three nationwide consumer reporting companies so the information in your file can be updated and corrected.

When the investigation is completed, the consumer reporting company must provide you with the written results as well as a free copy of your credit report and credit score if your dispute resulted in any change. Upon request, the consumer reporting company must also send notice of corrections to anyone who received your credit report during the past six months.

Additional Accounts in Your Credit Report
Your credit report reflects most but not necessarily all of your credit accounts. Most national department, chain store and all-purpose bank credit cards are included. Some accounts that are not usually included in your credit report are local retailers, credit unions and gasoline credit card companies.

When Negative Information Appears in Your Credit Report
Unfortunately, when negative information that is correct appears in your credit report, only time will assure its removal. A consumer reporting company can report most accurate negative information for seven years and bankruptcy information for ten years. Information regarding an unpaid judgment against you can be documented for seven years or until the statute of limitations runs out, whichever is longer. There is no time limit on reporting information about criminal convictions, information that is reported in response to your application for a job that pays over $75,000 a year or information reported because you have applied for more than $150,000 worth of credit or life insurance. The time period for calculating the seven-year reporting period generally begins from the date that the event occurred.

Free Credit Reports Online
It is important that you stay alert as to your credit scores. Your credit score is an indication of how well you are managing your financial responsibility. It is very important to know your credit scores and the contents of your credit report before you apply for any new loans, refinancing or lines of credit. You are entitled to one free credit report each year to review this information. To receive this free report (really free and really legitimate), go to www.annualcreditreport.com. Other websites or companies that claim to provide free copies of your credit report may prove to be scams.

We hope that you have found the above information on understanding your credit report to be helpful. For more help in understanding your credit report, please take a moment to fill out the form on the bottom of this page to speak with a member of our professional debt consolidation staff. You will be happy that you took the time to secure your financial future.