Understanding your credit report is an important step to gaining control over your financial situation. It provides lenders, employers, insurance providers and others with a comprehensive look at your finances as seen through your credit history. That's why it's important to learn exactly what information is in your credit report and how it got there.
When it comes to your credit, a little knowledge¬† can put you in control and help you reach your financial goals faster. The same is true for interpreting and reading your credit report.
Your credit report is an expansive collection of data pertaining to your credit history in other words, your history of obtaining and paying off debt. Don't think this is limited to your credit cards-your report details almost every loan, mortgage and financial agreement you have ever made, even if those loans are paid and the accounts closed.
In essence, your credit report is a snapshot of the current and historical state of your credit, or creditworthiness. For this reason, it is a primary reference that lenders use when deciding to lend you more money.
Your financial future could depend on what is detailed in your credit report. Learning how to read your credit report and being aware of the personal information it contains is critical. With the right knowledge, credit reports can help you:
a) Discover how lenders view your financial history.
b) Determine whether or not errors exist that taint the picture of your credit history, (which can hinder your ability to obtain loans).
c) Find inaccuracies, which may hint at simple errors or something more serious, such as identity theft.
The companies that compile credit information and generate credit reports are called consumer reporting agencies (or CRAs). There are three major credit bureaus - Experian, TransUnion and Equifax. The information these companies collect is stored in giant databases and is in turn sold to companies looking for information about you as they make decisions on lending, employment or insurance coverage.
There is more detailed information in your credit report than you might imagine. The most obvious is your personal information. This includes your name, current and previous addresses, your telephone number, reported variations of your Social Security number, and your past and present employers.
Following that data, information specific to your credit accounts, such as auto loans and credit cards (even your closed accounts), will be listed. Loan limits, outstanding balances, co-signers and your payment patterns are all part of the report. Be aware that if you are the co-signer on a loan or other extension of credit, you are as responsible as the primary loan applicant is for paying that loan back.
Your credit report also contains a section called "Inquiries," which is a list of parties that have requested to see a copy of the report. The Fair Credit Reporting Act allows only those credit grantors with a permissible purpose to inquire about your credit information without your prior consent. Other inquiries, for which you have given permission, may appear, such as those from landlords or employers.
Your credit report may also contain information of public record. Overdue child support payments, for instance, or bankruptcies and other court judgments may appear. Any of these points can remain on your record for up to ten years and negatively affect your creditworthiness. Any good credit you have will continue to build over time.
Remember, it's essential to understand the details of your credit report before you take action to improve it or begin resolving any errors. If you want a deeper understanding, make sure you seek out a "Certified Consumer Interviewer," certified by the Consumer Data Industry Association (CDIA). The effort saved with a little help from a financial specialist could go a very long way toward achieving your financial goals.
3. A Look Inside Your Credit Report:
Make a point of knowing exactly what information is in your credit report - your financial future may depend upon it.
Your credit report is used by others to assess your creditworthiness. Landlords, lenders, insurance companies, employers and banks look at your report to judge how good you are at managing your personal finances.
Your credit report is the story of your financial life, and it can be a very detailed document. Your personal information is listed first, including your name, your current and previous addresses, your telephone number (unless it is unlisted), reported variations of your Social Security number, date of birth, and past and present employers.
Following that data, information specific to your credit accounts will be listed in detail. Credit cards or car loans, the limits of those loans, and details of any joint account holders or co-signers will also be included. Your credit report also includes an "Inquiries" section, which lists anyone who has recently requested a copy of your credit report.
In some states, your credit report will also contain public record information. Such information could detail overdue child support payments, for instance, or bankruptcies and other court judgments. These entries can remain on your record for up to ten years and negatively affect your ability to obtain loans, or secure a job.
A credit report does NOT include information regarding your race, gender, religion, sexual orientation, national origin, medical history, or checking or savings accounts. The information on your credit report is protected by the Fair Credit Reporting Act (FCRA). Keep in mind that it is merely a report of your credit history and does NOT include your "credit score," sometimes known as your FICO score. Your FICO score is derived from the information in your credit report. Unlike your credit report, the FICO score rates your creditworthiness in comparison to other consumers. (Learn more about your FICO score).
How long it's there.
Generally, all your credit history information remains on your report for many years. Active positive credit information may remain on your report indefinitely, while a personal bankruptcy filing can remain on your report for up to 10 years. Remember, even if an outstanding item has been paid in full, the presence of even a one-time occurrence of late payment indicates a potential concern for creditors.
For a copy of your credit report, simply write to or call one of the three major credit bureaus listed below:
¬†- Equifax, P.O. Box 740241, Atlanta, GA 30374, or call (800) 685-1111.
¬†- Experian, P.O. Box 2002, Allen, TX 75013, or call (888) 397-3742.
¬†- TransUnion, P.O. Box 1000, Chester, PA 19022, or call (800) 916-8800 .
You are entitled to one free credit report from each of the three agencies annually. Find out about how to obtain your free annual credit report.
If you haven't obtained a copy of your credit report recently, consider doing it now. If you need help understanding it, seek guidance from a "Certified Consumer Interviewer," certified by the Consumer Data Industry Association (CDIA). When it comes to reducing debt and improving your credit, be sure to look for a qualified agency with "Certified Credit Counselors," certified by the National Foundation for Credit Counseling (NFCC). Make certain that the agency is a member in good standing of both the NFCC and the Better Business Bureau (BBB). Also, look for the BBBOnLine Reliability Seal - this is one way to ensure that the business will deliver on its promises both in the real world and the virtual world.¬†
4. How Credit Reports Can Help Prevent Identity Theft:
Identity theft is on the rise. According to a 2005 report conducted for the Council of Better Business Bureaus (CBBB), more than 9.3 million Americans became victims of identity fraud within the past 12 months.
Identity theft is a particularly harsh crime in which someone wrongfully obtains and uses another person's personal data to commit fraud or deception, typically for his or her own economic gain. This crime is often undetectable until you apply for credit or your report is pulled for insurance or employment verification. Unfortunately, it is often a monumental task to identify all of the issues/errors and to properly correct them. To reduce the risk of ID theft, keep abreast of your credit report and the details that it contains. One should obtain their report from all three major credit bureaus, at least once annually. Thanks to a recent amendment to the Fair Credit Reporting Act (FCRA), you are entitled to receive one free copy of your credit bureau each year.
Obtaining your credit report:
The first step to preventing identity theft is obtaining a copy of your credit report. You can contact any of the credit reporting agencies below:
Equifax, P.O. Box 740241, Atlanta, GA 30374; (800) 685-1111
Experian, P.O. Box 2002, Allen, TX 75013; (888) 397-3742
Look for the warning signs:
Once you have your credit report in hand, take a good look at it. Is there loan activity on your report that you don't recognize? Do any of the balances look odd or inflated? Are there active credit card accounts that you have no knowledge or memory of? Also, are the monthly statements for accounts you had opened in the past no longer arriving in the mail? If the answer to any of these questions is yes, you may be a victim of identity theft.
If you think you may be a victim:
Immediately call the financial institutions or credit card companies in question and ask for the account history and copies of any missing statements. Also, on accounts that you are aware of, cross-check your personal information such as your current mailing address to see if any information has been changed.
If you suspect fraud, contact the police immediately. You should be directed to take the following actions:
a) Contact the fraud department of any of the three major credit bureaus to place a fraud alert on your credit file. As soon as one credit bureau confirms your fraud alert, the two other credit bureaus will be automatically notified, and all three credit reports will be sent to you free of charge.
b) Contact creditors to close the accounts that you know or believe have been tampered with or opened fraudulently. Use the "ID Theft Affidavit" when disputing new unauthorized accounts.
c) File a police report. Get a copy of the report to submit to your creditors and other agencies that may require proof of the crime.
e) File your complaint with the Federal Trade Commission. The FTC maintains a database of identity theft cases used by law enforcement agencies for investigations.
Prevent identity theft from happening to you:
How does someone steal your identity? It can happen any number of ways, beginning with the junk mail you toss out, which may contain bank and credit card statements or "special offer" checks.
One of the best ways you can protect your credit is to understand how to read your credit report and spot suspicious activity. Consult only with a "Certified Consumer Interviewer," certified by the Consumer Data Industry Association (CDIA), to get help understanding your credit report. And when it comes to understanding your credit report and repairing your credit, don't trust just anyone with your personal finances. Consult only with a credit counselor certified by the National Foundation for Credit Counseling (NFCC), and verify that the credit counseling agency is a member in good standing of both the NFCC and the Better Business Bureau (BBB).