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CREDIT SCORES LOANS & CREDIT HOW TO BUY BAD CREDIT BUDGETING |
What’s in your Credit Report?If you have less than perfect credit and are thinking that you may not qualify for your next mortgage, car loan or credit card, think again. Rather than listen to what friends and family may be telling you, find out for yourself what kind of financial shape you are in. Start by getting a copy of your annual credit report from Equifax, Experian, or Trans Union, the major credit bureaus. Some states mandate that you must be given two free copies of your report upon request every year. All three bureaus have websites or 800 numbers that will allow you to order a copy of your credit report though they are not required to give you your credit report score and may charge you for that service. You may be thinking “What’s in my credit report and how does my credit report affect me?” The answer to both is “a lot.” Your annual credit report is a compilation of records of all the credit items you have had and a history of your record of payments. Your score is an analysis of the amount of credit you have available and are using, combined with the record of payments you have made over the past few years. Your credit report score is calculated using a complicated and secret algorithm that assigns you a rating between 400 and 800, your “score”. Detailed Records Let’s look at what else is shown on your credit report. It starts with a record of your social security number, current address and telephone numbers and may contain your spouse’s name and social security number and your date of birth. Any public records linked to your name will be displayed on your credit report, including bankruptcies, judgments against you and the like. Next up are detailed records of your credit cards, mortgages, student loans, car loans and most other credit items. Utility companies, rental properties and many other types of creditors may report to the credit bureaus as well. Most entries on your credit report will show the date the credit item was opened, the credit limit of the account, the highest balance you have used and the monthly payment due. A date next to each item shows the last date you paid and another entry shows whether the account was paid, charged off or still active. Signs of trouble brewing Your annual credit report is your financial scorecard and can make all the difference in your being turned down for a loan, credit card, insurance or employment. Late or unpaid items on your credit report indicate to a potential lender that you may represent a risk at some future date, as indicated by your past behavior. Of course, your behavior may have been intentional at the time, as sometimes happens when you lose a job or become incapacitated. Unfortunately, your credit report doesn’t show the whether your failure to pay on time was intentional or beyond your control. Paying a higher interest rate on a car loan is a painful reminder that you may have been a little careless in the past. But higher interest rates are only a part of what you may pay. Your insurance application could be turned down and so could your job application as many employers now treat poor credit as a predictor of job performance. Rental and utility companies frequently run credit checks before allowing you service and a spotty credit record may mean hefty deposits on your part. Errors on your report Errors on your annual credit report can have as adverse an effect as if you had defaulted on a debt. It is possible that your credit report contains erroneous information meant for someone with a closely related social security number, a similar name or a nearby address. Even errors in addresses could cause good credit information to be left off your report, and that can have as much effect on your credit score as bad news. If you are trying to build or rebuild your credit, you want as much good information as possible to show up on your credit report. Should you find any errors on your credit report, send a formal request to the credit bureaus and have the incorrect information removed. If you don’t have the time to do it yourself, there are online credit report tools that can walk you through the process. You are allowed by law to request a detailed statement substantiating your debt from any company that posts information to your credit report. The Fair Debt Credit Reporting Act requires creditors to give you a response within 30 days of your request, otherwise they must remove the item from your credit report. If the statute of limitations has run out, you can request removal of the item from your credit report. But do not take this to mean that you don’t owe the debt any longer, as I do not endorse walking away from one's obligations. There are many other details to learn about your annual credit report and about improving your credit score but you can start now by calling the three main credit-reporting agencies: Trans Union (800-916-8800), Equifax (800-685-1111) and Experian (800-682-7654). |
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