A Good Credit Report Gives You Financial Muscle
If you thought you got the last report card of your life when you graduated
from school, you might be surprised to find that you're being graded right now -
on how you pay your bills. Just the way a good report card got you into the
school or job you wanted, a good credit report can help you get the things you
want now - a credit card, a mortgage or other loan, better terms on the money
you borrow, an apartment, even a job. Since good credit is such a valuable
financial tool, you'll want to protect yours so that it's there for you when you
need it someday.
How to Get Your Credit Report
Checking your credit report every year is a good idea; you can catch errors
or fraudulent activity before it gets out of hand. If you're planning to borrow
money for a big purchase like a car or home, check your credit about six months
before applying for the loan. Cleaning up or repairing your credit can take a
minimum of 30 days and often much longer, so you'll want to know early if your
report is less than glowing.
The three major credit bureaus that keep track of your credit history are
Equifax, TransUnion and Experian. Lenders report your payment activity to the
bureaus and are allowed to request and review credit reports when they are
considering granting credit. One credit report is usually all you need if you
just want to get a general idea of how you rate. However, since the information
in each of the three reports can vary, you should order one from all three
bureaus if you want to know exactly what each one is reporting.
The Fair and Accurate Credit Transaction Act (FACTA) allows for all consumers
to receive a free copy of their credit report from each of the three credit
reporting bureaus every 12 months. Reports can be ordered through www.annualcreditreport.com or by calling 877-322-8228.
You will not be able to receive these free annual reports by contacting the
credit bureaus directly. However, if you've been denied credit within the last
60 days, you may be entitled to receive copies of your credit reports. Find out
which of the three bureaus was used by your lender, and then contact that bureau
for your report.
When you receive your report, review the following pieces of information for
- Identifying information, such as your name, date of birth, current and
previous addresses, Social Security number, current and previous employers, and
your spouse's name.
- Credit information, such as accounts or loans you have open, outstanding
balances, credit limits, and payment history.
- Public record information, such as bankruptcies, tax liens, and judgments
(for example, child support payments you must make).
- Credit inquiries that indicate you recently applied for new credit. (Lots of
recent inquiries, unless they're obviously related to shopping for the best
terms on a loan, are considered a warning sign to lenders that you may be having
In general, negatives on your credit report would include:
- Any account in collections.
- Any court account (for example: liens, judgments, personal
- Any items showing one or more late payments.
- Excessive creditor inquiries.
How to Clean Up Your Report
There are credit repair agencies that charge handsomely for the service of
cleaning up your credit report, but according to the Federal Trade Commission
(FTC), many of them make false claims. Besides, there's no need to hire someone
to do what you can easily do yourself.
If your credit report is inaccurate, write to each credit bureau and include
the following information:
- Your complete name.
- Your complete mailing address.
- Your birth date.
- Your Social Security number.
- The name and account number of the creditor and item you are disputing.
- The exact reason why you disagree with the information being reported.
- Your signature.
Include a copy of your original credit report with the letter, but keep
copies of both for your records. You should receive a new, corrected credit
report from the credit bureau after 30 days. If you haven't heard anything from
them within that time frame, follow up with a second letter.
Just because your credit report works behind the scenes, don't forget to give
it the attention it deserves. A good grade in "credit" is worth working for.