When people find out I’m a financial counselor I get deluged with questions about how credit reports work and how the credit bureaus come up with credit scores. Recently, I had two interesting consultations with members who have very different backgrounds, but who also had virtually the same questions about their credit reports and scores. One member has a sterling credit history and also has an “impressive” amount of credit card debt. The other calls himself “credit impaired.” He has no credit card debt, but has quite a number of unpaid collection accounts on his history. Both members as it turned out knew relatively little about their credit reports. Working with these members inspired me to sit down and put together a fast and easy guide to help you better understand your credit report:
Think of a credit report as your “financial report card.” It is a record of your past borrowing and repayment history. The information is gathered and sold by three large companies called the credit bureaus: Experian, Equifax and Transunion. These are the corporations that lenders, retailers, credit card companies, collection agencies, the courts, etc. subscribe to in order to gather information about us. Here are some quick facts you should know about your credit report:
What type of information do credit bureaus collect and sell?
- Identification and employment information: Your name, birth date, Social Security number, employer, and spouse’s name are routinely noted. The Credit Bureaus also may provide information about your employment history, home ownership, income, and previous address, if a creditor requests this type of information.
- Payment history: Your accounts with different creditors are listed, showing how much credit has been extended and whether you’ve paid on time. Related events, such as referral of an overdue account to a collection agency, may also be noted.
- Inquiries: Credit Bureaus must maintain a record of all creditors who have asked for your credit history within the past year, and a record of those persons or businesses requesting your credit history for employment purposes for the past two years.
- Public record information: Events that are a matter of public record, such as bankruptcies, foreclosures, or tax liens, may appear in your report.
How often should I look at my credit report?
- You should review your credit history once a year to make sure the information on it is correct. It is your responsibility to ensure your credit history is accurate. If you go to get a car loan, for example, and derogatory (and inaccurate) information comes up on your credit report, your loan may be rejected and you won’t be happy.
How do I obtain my credit report?
- You can order a FREE credit report from AnnualCreditReport.com. Yes, this site is the real McCoy. You are allowed to order a credit report that includes information from all three of the credit bureaus for free once a year though this site.
What if I find something on my credit report that is inaccurate?
- If you review your credit report and find some errors, you need to decide how you want to dispute them. For starters, all three credit bureaus offer online dispute resolution. This is a great place to start, though you can’t necessarily fix all of your problems online. Here are some important numbers and links you can use:
Equifax: (800) 685-1111 (Online Dispute Resolution)
Experian: (888) 397-3742 (Online Dispute Resolution)
TransUnion: (800) 888-4213 (Online Dispute Resolution)
In future posts
I hope this brief overview of credit reports motivates you to order yours and to take a careful look at it. Knowing what’s going on with your credit is crucial in today’s world. Lenders, landlords, employers and insurance companies all use credit reports to make important financial and risk management decisions about us.
In future posts, I’m going to talk about how your credit score is calculated and how derogatory information is shown on a credit report.
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