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Your Credit Report

Free Credit Reports Available

The Fair and Accurate Credit Transactions Act (FACTA) requires each of the top 3 credit reporting agencies to provide 1 free credit report annually to all consumers. This law came about as a result of the proliferation of Identity Theft.

To receive your free report:

  1. Visit the Free Annual Credit Report web site at (must type in the URL or copy and paste), or
  2. Call (877) 322-8228.

Learn more about the Fair and Accurate Credit Transactions Act.

Knowing Your Credit Report

Knowing what's on your credit report is very important, particularly if you're about to buy a house or apply for a loan. You need to know what information is on your report so you can correct any mistakes. You can also help protect yourself from identity theft by watching your credit reports for accounts you did not open or a large number of Inquiries.

Establishing and maintaining good credit is an important part of long-term financial planning. Most individuals do not have enough cash to cover emergency expenses or to make major purchases such as a home, car, or college education. As a result, accessing credit has become an important part of our lives. Most creditors rely heavily on the information in your credit reports for granting loans. Knowing what is on your credit reports and how to build and repair your credit is an important step to taking control of your finances.

The Internet is rife with information concerning your credit report and how to get a free copy. Unfortunately, most of these sites have gimmicks that require your credit card information for a "free" trial subscription to one of their products. It's normally less expensive to contact each bureau directly and ask for a copy of your report.

Did You Know...

  1. Credit reports can contain errors that can ruin your credit? Errors can be fixed if you know about them.
  2. You could be a victim of identity theft? This crime can go undetected for years. By checking your credit report you can help protect yourself.
  3. Your credit report is often the first and only impression that you make?
  4. Today's technology has made it easier to commit credit fraud? Examining your credit report can stop credit fraud before it causes lasting damage.

It's a good idea to order a copy of your report from each of the three major credit bureaus each year. The average fee is $10. You should include the following information in your request:

  • Your full name. State any aliases or maiden name, your middle initial, and generational indicators: Jr., Sr., II, or III.
  • Current address and former addresses for the last 5 years. If you have moved in the last 6 months, provide proof of your current address from a utility bill or phone bill. The credit bureau may not have your current address on file yet.
  • Social security number. This must be included to process your request.
  • Spouse's name if applicable.
  • State whether you have been denied credit within 60 days (include a copy of the credit denial or related details).

Contact information:

Credit Info. Services
P.O. Box 740256
Atlanta, GA 30374-0256
Phone: (800) 685-1111
National Disclosure Center
P.O. Box 1000
Chester, PA 19022
Phone: (800) 888-4213
EXPERIAN (formerly TRW)
National Consumer Assistance Center
P.O. Box 2104
Allen, TX 75013-2104
Phone: (888) 397-3742

Each of these sites provides you with in-depth information concerning all aspects of your credit.

How to read your credit report

It is important that you know how to read your credit report and understand the special coding. Check the details; make sure your name is spelled correctly, and that your date of birth and social security number are correct. If these items are incorrect, someone else's credit history may be mistakenly included in your file.

You should find all of your creditors listed on your credit report. The first thing to do is to find and circle any negative remarks. You will find a key to the coding symbols on the report. The law requires credit bureaus to explain anything on the report that you cannot understand, so contact them if you have any questions. Next, look for any damaging remarks in the Historical Status section of your report.

Identify the negative marks on your credit report

The most damaging remarks are "past dues". A "past due" is noted whenever your payment wasn't received within 30 days of the due date. Your payment must actually be credited to your account by the due date, not merely mailed by that date, to avoid a late payment mark. Most "past due" notations are correct. However, there are times when entries are made accidentally, or the mail delivered your payment late, or there was a delay in processing your payment.

Negative remarks from public record data should also be examined closely for accuracy. These include:

  • Bankruptcy - bankruptcy indicates borrower once was financially unable to pay obligations when due.
  • Tax Lien - borrower owes taxes and an IRS or state tax lien was entered against borrower's property.
  • Judgment - there is now a judgment on record against borrower due to losing a lawsuit either at trial or because of failure to defend.
  • Settled - a pending lawsuit was resolved before trial.
  • Child Support - failure to pay court-ordered child support.
  • Withdrawn - a bankruptcy case was withdrawn.
  • Dismissed - either the court ruled in borrower's favor or the creditor failed to show up and your the was dismissed.
  • Discharged - bankruptcy was filed and the court relieved borrower of debts.
  • Paid and Satisfied - a court judgment or a collections account has been fully paid.
  • Suit - there is a legal action pending against borrower.

Clearly, each of these marks indicates a bad credit risk.

Every time you apply for credit, an "Inquiry" will be listed on your report. Too many credit Inquiries within a short period of time may be interpreted negatively. Quite often, those having financial problems seek additional credit to solve them. Creditors will deny you credit when there are too many Inquiries on your report. Each creditor determines how many Inquiries are "too many". To offset the problem, you can have a 100-word (or less) statement added to your credit report to explain in a positive way why you have so many credit Inquiries.

Creditors look for patterns of behavior regarding credit usage. For example, holding or applying for several credit cards may be detrimental to future credit applications, even if your existing credit cards have zero balances. In addition, your "debt ratio" (the percentage of your monthly income that is spent in debt payments), may be too high.

Your credit report will also include an "Account Profile" column. This column contains a summary rating for each account. A summary may read "positive," "negative" or "non-rated":

  • "Positive" means you pay on time.
  • "Negative" means serious credit problems, perhaps a defaulted debt.
  • "Nonrated" may signify a few late payments, which still gives you a weak credit report even when there is no strongly negative entry.

Each negative or non-rated entry has a code that reflects the nature of the problem. Your goal is to protest and eventually remove every negative or non-rated profile.

Credit Scores

In addition to your credit report, most creditors will look at your credit score. While there are many kinds of credit scores, the most commonly used are credit bureau risk scores developed by Fair, Isaac & Company. These are commonly known as FICO scores, although they have different names at each of the national credit reporting agencies such as risk score, score card, or scoring model.

A credit score is a snapshot of your credit history. A low score can mean you won't get a credit card or loan. Also, some lenders use your credit score and other information to set the "price" (interest rate) for your loan. A lower score will result in a higher interest rate.

A credit score tells a lender how likely an individual is to repay a loan or make credit payments on time. When a lender requests a credit report and score from a credit reporting agency, the score is calculated by a "scorecard" or scoring model - a mathematical equation that evaluates many types of information from your credit report at that agency. By comparing this information to the patterns of thousands of other credit reports, scoring identifies your level of credit risk.

Factors Affecting Your Credit Score

Fair, Isaac & Company considers the following factors in determining your credit score:

  • Payment history. Your score is negatively affected if you have paid bills late, had an account sent to collection or declared bankruptcy. The more recent the problem, the lower your score -- a 30-day late payment today hurts more than a bankruptcy five years ago.
  • Outstanding debt. If the amount you owe is close to your credit limit, that is likely to have a negative effect on your score. A low balance on two cards is better than a high balance on one.
  • Length of your credit history. The longer your accounts have been open the better.
  • Recent Inquiries on your report. If you have recently applied for many new accounts, that may negatively affect your score. Promotional Inquiries don't count.
  • Types of credit in use. Loans from finance companies generally lower your credit score.

This is only a guide as to what credit scoring companies deem important. Keep in mind that some companies may consider different factors. Among the items that credit scoring companies cannot consider are age, race, gender, education, national origin, marital status and receipt of public assistance.

What the Numbers Mean

Credit scores range from 400 to 900, with an average of approximately 700. According to the model, as your score increases, your risk of default decreases. You may have difficulty convincing a creditor to make you an affordable loan (or any loan at all) if your score is far below average.

Just as your credit history can vary from credit bureau to credit bureau, so can your credit scores. It is possible to have a high score with one credit bureau (Equifax, Experian, or TransUnion) and a low credit score with another, just as you might have a clean credit history with one bureau and a muddied record with another. Wide-ranging credit scores however, are rare.

Improving Your Credit Rating and Score

If you want to improve your credit rating and score, take the following steps:

  • Pay your bills on time.
  • Update old accounts with each credit bureau (accounts reporting a balance may have been paid down to zero).
  • Don't max out your credit cards. Keep your balances below 30% of your credit limit, perhaps by carrying small balances on several cards rather than high balances on one or two.
  • Limit the number of times you apply for credit.
  • Stay away from finance companies.

Don't give up hope if you have a low score. If you think the problem is caused by mistakes on your credit report, you should get a copy of your credit report, fix the problem, and explain the situation to the lender. Most lenders will override credit scores if they think you are a good risk despite problems with your score.

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