Your Credit Report

Credit Report

Though it's easy to find out how banks, department stores and potential employers view you by looking at your credit report, millions of Americans simply haven't bothered.

But reading your credit report is a great way to learn a key facet about how to become a smart borrower.

By learning that disciplined loan repayment is highly valued by lenders, you can strengthen future opportunities to qualify for loans.

Ever try to rent a car without a credit card? Good luck. Virtually all car rental companies require you to at least reserve a car with a card. The fact of the matter is that trying to live in the 21st century without credit is becoming increasingly difficult. Some people perceive that credit is something you either have or don't have. But the truth is that establishing credit is relatively easy to do. All it involves is creating a history of repayment by which banks, credit card companies and others can judge you by.

Apply For Credit

You can create a history of repayment in a variety of ways. For starters, request and review your credit report. Assuming that it is in order and that you don't have a bad credit history, consider applying for a credit card, gas station card, department store card or loan from a bank. You can pick up applications at banks, credit unions, department stores and online from your preferred bank or store. The applications will ask a wide variety of questions, including your name, place of employment, income, etc. Fill the answers in as accurately as possible. For those who don't have verifiable income, a crucial component in a creditor's decision to give you credit, consider having a parent or other responsible adult co-sign the application.

Once you have established credit, make sure you pay your bills on time. This is one of the most important factors in your credit profile and your ability to obtain additional credit in the future.

If you apply for credit and are rejected, find out why you were denied from the company that turned you down.

What is in a credit report?

Credit reports contain information about who you are, such as your name, home address, birth date and possibly your employer. They also contain inquiries into your credit file, which are made by credit card companies and others.

Additionally, a credit report contains public record information and, of course, credit history. Credit history includes the names of credit cards you possess, your outstanding balances, your history of making payments and other items.

Creditors, such as credit card companies and banks, don't themselves publish credit reports. Instead, they rely on credit reporting agencies, such as Trans Union, Experian and Equifax, to aggregate, maintain and update data collected by credit bureaus all over the country.

It's important to realize that credit reports contain no judgements or interpretations about your creditworthiness, merely facts.

Creditors take your information and using a set of formulas they or other companies have developed, decide how worthy of credit you are. In fact, one creditor may grant you credit and another one may not using the very same data from your credit report. Obviously if you are applying for credit, a good repayment history will help.

How long does information stay on my credit report?

Depending on the type of information, it can stay on your credit report for up to 10 years. For example, for credit accounts, information about accounts paid as agreed remain for up to 10 years. Accounts not paid as agreed remain for seven years. Information on collection accounts remain for seven years.

For public record documents, such as courthouse records, they remain for seven years from the date filed, except for bankruptcy records under Chapters 7 and 11, which remain for 10 years from the date filed.

Access to and obtaining your credit report.

Besides yourself, those who can see your report are credit grantors such as banks, collection agencies, insurance companies and employers. Under the Fair Credit Reporting Act (FCRA) businesses must have a "permissible purpose," to obtain your credit report. Employers who see an irregular record of repayment, may view you in a negative light, particularly for a sensitive position, such as with a security company or government intelligence agency.

Even if you are not applying for credit or a job, it's important to review your credit report about once a year.

Getting your credit report is simple. Merely call or go to the Web sites of the three largest credit reporting agencies.

Experian: 1 (888) 397-3742

The reports generally cost under $10, depending on the state in which you live and the company you request it from. You may qualify for a free credit report, if, for example, you are unemployed seeking work within the next 60 days, receiving public assistance, or have been denied credit in the last 60 days.

After receiving your report, you should carefully review it to look for inaccuracies. Under the FCRA, you have the right to question the information and to have your questions re-investigated. Each company provides a clear method of responding to their reports to correct inaccuracies. Read: How to buy a mortgaged property from others

If you have a spotty credit report and it is accurate, there is not much you can do but wait until the information becomes old enough so that it is dropped from your record. Companies that promise to "fix" your credit cannot alter correct information.

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