Monday, 11 February 2019

Whether it's good or bad, your credit history follows you around for life.

Good credit can help you score favorable terms for your next mortgage, personal loan, or car loan, while bad credit can can prevent you from accomplishing these financial goals or even a new checking account.

Simply put, your credit score is important, which is why you hear all the time you need to check your credit report regularly. But it's critical that you understand what it says, and that's not always easy. 

Here are answers to some common questions about credit reports:

1. How do I get my credit report?

By law you are entitled to one free credit report per year from each of the three main credit-reporting companies. There are countless websites and advertisements promising you free access to your report. But only the government-endorsed provides truly free credit reports. This site allows individuals to get one credit report from each of the three credit bureaus — Equifax, Experian, and TransUnion — free each year. 

You can request your reports directly from the site. If you'd prefer to request your reports by phone, call 1-877-322-8228. You can also request them by mail by downloading this form and sending it to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. 

You can request copies of your credit reports from the three bureaus at separate times, but according to the Consumer Financial Protection Bureau, seeing all three reports at one time can allow you to compare reports and more easily detect errors. 

2. How do I read my credit reports?

Your credit reports from the three major bureaus can differ slightly in appearance, but generally they follow the same formula. At the top of the page will be your name, a report number, and the date you requested the report. 

Near the top will be a header titled “Potentially Negative Items" which will list items a creditor or employer might see as unfavorable. This section can include bankruptcies, liens, outstanding payments, and court judgments. 

Below that, you'll see the “Public Records" section. If you have court judgments or bankruptcies on your record, there will be a list of county clerks (with addresses) and pertinent dates. Next “Collection Accounts" are listed. This will include unpaid bills, defaulted credit cards, utilities disconnected, and accounts turned over to collection agencies. 

A section titled “Credit Accounts" will follow and list the outstanding credit cards balances and/or late payments posted to your account within the past two years. The “Accounts in Good Standing" will list credit cards and/or loans currently being paid according to terms. 

You will likely see a section titled “Requests for Your Credit History" near the bottom of your credit report. This will include inquiries for your credit history by outside parties such as employers, insurance companies, or banks. 

3. How do I dispute incorrect information?

Not all creditors report to all three bureaus, so there's a good chance you will see inconsistencies when comparing the three reports. But inconsistencies are different from mistakes. A mistake, for example, would be a report of a loan you never applied for, or a credit card balance you do not recognize. If you see such mistakes, The Federal Trade Commission recommends a two-step process for disputes

First, the FTC recommends you send a letter — preferably by certified mail so you'll have a record — to the credit reporting company using this sample dispute letter. Explain the items you'd like to dispute and include a copy of your report with the items circled for easier identification. Credit reporting agencies are required to investigate disputes within 30 days and send you the results of their investigation. If the dispute isn't resolved to your satisfaction, you can request your dispute letter be included with future reports. 

Second, the FTC encourages you to send another letter to the company supplying the misinformation to the credit reporting agency. If the dispute comes out in your favor, the company that submitted the incorrect information will be required to instruct the credit bureau to update or delete the item in question. 

4. What determines my credit score?

Credit reports and credit scores are two different things. The document you receive when you make your request is your credit report, and your credit score is a number assigned to you based on the information in your report.

Again, the three credit bureaus use different methods for determining credit scores, so most lenders use your FICO™ score. FICO scores range from 300-850 and are determined by looking at your payment history, amounts owed, length of your credit history, types of credit in use, and new credit requests. Obviously, the higher your score, the better your chances are of getting credit with the most favorable terms and rates. 

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