Your credit report is simply a compilation of a lot of information which indicates how you manage debt. It really contains a lot of information about you and your money management skills. Information you will probably find on your credit report includes things like:
- Total amount of debt you owe
- How timely you are paying your bills
- How often you have had utilities shut off due to non-payment
- If you have ever filed for a bankruptcy
- If you have ever had a foreclosure on a house
- If you have had a vehicle repossessed
- Work history and where you presently work
- Where you live
All of this information is about you and basically how well you handle your money and debts. Don’t you think you need to know what everyone else knows about your money handling skills?
How is my credit score determined?
Your credit rating, or credit score is reflected in a single number that lies somewhere in the range between 150 and 900. All of your creditworthiness is rolled up in this one number. There is actually a very complex formula used to compile all the information that is in your credit file to determine the single score. This one number is like having a solitary picture of what your credit looks like overall.
What types of things are used to factor into the formula to get my final score?
- Your payment history
- How many lines of credit you have open and active
- How long each of your credit lines have been opened
- When you began developing your credit and how long you’ve had credit information
- What types of credit you have (credit cards, loans, medical bills, etc.)
- How much credit you have available to you and how much of it you have already used
- How many inquiries have been made into your credit information (this occurs when you apply for a line of credit like a new credit card or a loan)
What does my credit file really say?
Everything in your credit report can have a positive, negative or a neutral rating. Negative items on your credit include things like:
- Overdue accounts
- Accounts that have been “charged off” after non-payment (may count against you for 7 years)
- Bankruptcies (only count against you for 10 years)
- Applying for a job that pays you at least $75000 can be negative
- Applying for credit or even life insurance of at least $150,000 can have a negative effect
Things that have a positive influence on your credit report:
- Making payments on time every time
- Not applying for numerous credit lines
- Paying off a loan or debt
- Not applying for more lines of credit
How Important is monitoring my credit reports?
Do you realize how many people have legal access to your credit report?
- Cell phone providers
- Insurance companies
- Utility providers
These can all review your credit report and make their decisions about extending you credit or doing business with you based on it. Just because they can review your credit report is a good reason for you to take a look at it periodically. But why should you care if they can see your credit report?
- Your credit report is a “wealth building tool” and you can use your score to get lower interest on loans
- Credit card issuers base the interest rate they offer you on your credit score
- Low interest mortgage rates are still obtainable if your score is good
- The FTC (Federal Trade Commission) estimates about 10 to 21% of consumers find and confirm errors on credit reports each year
You should check your credit score at least once a year. This helps you keep an eye on your own credit score, manage your score better and correct mistakes if they occur.
When should you review credit reports?
It is advisable as stated above, that you check your credit report at least annually just to make sure there are not any errors. These can keep you from getting better terms on your credit transactions or on a loan. Other times you should check your credit report include:
- Prior to making a major purchase like a house or car
- Before you apply for a new job (some companies check credit histories before hiring an employee
I know what you are thinking, how does this really help me? Well there are a couple of very good reasons to check and double check your credit score. By checking your credit report you can:
- Guard yourself against identity theft by finding delinquent payments on accounts you didn’t open
- Find and fix any errors that are on your credit report by filing disputes
You are eligible to receive a free copy of your credit report one time every 12 months. This document will reflect information collected by the three major consumer reporting agencies. There are other consumer reporting agencies that might also be beneficial to obtain reports from. These types of agencies not only collect information about you, but they may also share it with interested parties. Along with your credit report try to obtain your records including:
- Medical records or medical payments
- Residential history or tenant history
- Employment history
- Check writing history
- Insurance claims that were made
Most of these organizations also provide one free report yearly. There are some of the specialty consumer reporting agencies that might charge a small fee for you to obtain your report.
How do I get my credit report?
There are three major credit reporting agencies:
There are federal laws requiring these three major agencies to provide a consumer with one free copyof their credit report every year. Obtaining your credit report from one or all of these agencies doesn’t have any influence on your credit rating. You can go to their sites online and print out a copy of your credit report to keep in your files. Remember that these agencies do not necessarily share any information between them so you need to get a report from each of them. It’s the best way to stay on top of your report in case there are any mistakes or signs of identity theft occurring.
There are also some other times when these agencies have to give you a free copy of your credit report.
- If you’ve been a victim of fraud
- If you are not employed and are looking for work
- If you get turned down for a loan because of the information on your credit report
It’s important to know what your credit report is saying about you. You also want to know what everyone else is seeing when they request a copy. Stay on top of your credit by always knowing how your credit report is affecting your life.