"We’re not worthy, we’re not worthy…or are we?” Credit Reporting Basics
As part of any personal finance plan, you need to know what your financial footprint has been up to this point. The easiest way to figure this out is to review your credit reports. The items on your reports determine not only how creditors currently view you (financially judgmental if you ask me), but it also determines what loans and credit cards you will qualify for in the future and at what rates (aaahhh the cost of borrowing other people’s money). Let’s start at the beginning.
What is it?
A credit report is a detailed report of an individual’s credit history prepared by a credit bureau and used by creditors to determine your credit worthiness. It includes:
[if !supportLists]1. [endif]Personal data – Name, social security number, current and previous addresses, and your employment history.
[if !supportLists]2. Credit history summary - The number of accounts and type of accounts that have been opened in your name
[if !supportLists]3. [endif]Detailed account information - Type of account, the high/low balances of the accounts, payment history, and any notes from the creditor.
[if !supportLists]4. [endif]Credit inquiries - Love getting those “You’ve been pre-approved for a “0% APR no annual fees” credit card promotions in the mail? This section lists out all inquiries of creditors who either deem you to possibly be a credit worthy applicant (aka “soft inquiries” which lead to the credit card promotion mail) or are making a lending determination because you’ve applied for credit (aka “hard inquiries”).
[if !supportLists]5. [endif]Accounts in collections - Cue the thunder and storm clouds. This section lists out any accounts turned over to a credit agency (such as information about liens, wages garnishments via federal, state or county records). You never want anything in this section.
Where do I get it?
Credit reports are prepared by three credit bureaus named Experian, Equifax, and TransUnion. You are always able to obtain your credit reports directly from these bureaus for a fee, but I like to use www.annualcreditreport.com because 1) It’s FREE, 2) You get all three reports, and 3) You’re able to request your reports every 12 months (as Federal law allows you to).
What do I do with it?
Congratulations, you have all three credit reports! Now what? Time to review. It is so important to review the information and make sure what is being reported is accurate across all three reports. Remember, this information is how creditors view you. You at least want them doing that with information that’s accurate. I helped my friend pull their credit reports and we found a line of credit opened in the late 1970s…which would have been fine, but they were born in the mid-80s. Needless to say, some financial wires got crossed. If you find information that needs to be updated or removed, you can create a claim to have the credit bureau reporting the information investigate and resolve the issue.
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