Most people don’t realize that we don’t just have one credit report, but we actually have three. We have one from each credit bureau. Everyone is allowed to get their credit report once each year for free. However, many people become quite confused after they get it because they don’t know how to read it. We will go over that, among other things about your credit report, in this article.
There are different formats used by each credit bureau and it is very important to take the time to read through all three credit reports. Each report from the different bureaus can contain different information and could even contain mistakes.
The reason that each bureau has different information is because creditors choose which bureau to give information to. They are required to supply at least one bureau with information, but not all three. This means that one bureau may have negative information in your report while another does not.
What credit reports consist of
Credit reports are usually split up into the following information:
- Your identifying section does just that. It identifies who you are and includes information such as your name, current and prior address and social security number. It can also include your license number and other personal identifiers.
- The next section is your credit history. This section includes your creditor’s name and account number. It also includes accounts that you have or have had open, types of credit, loans and amounts, credit cards and credit limits.
- The public records section follows the credit history section. It is very negative to have anything in your public records section. Public records list information in finances such as judgments, tax liens and bankruptcies. However this section does not include information such as lawsuits or arrests.
- The final section is inquiries. The inquiries section is made up of a list of every creditor who has looked at your credit report.
Many errors could be found on your credit report. Twenty percent of consumers have errors on their credit report and five percent have errors significant enough to strongly affect their credit score. This can cost consumers money in high interest loans.
If a mistake or error is found or your credit report then you are going to have to dispute it. This is a very long and trying process; however, this process needs to be complete and the mistakes need to be corrected in order to move on and ensure that your credit score is corrected and in good shape.
A good place to start is by filing a dispute online. From there the next step is to write a letter to the credit bureau explaining the error and sending fully documented records to prove that the information is incorrect. It is also strongly advised to send a copy of the credit report with the errors circled or highlighted.
After this it is imported to formally inform the creditors who sent the bureaus the wrong information that you are filing a dispute and also supply them with the same proof provided to the credit bureau. Both letters should be sent by verified mail so that you know exactly when the letters and information is received.
The credit bureau has 30 to 45 days to respond about the dispute. Until the issue is resolved, it will stay on your credit report and if it is significant enough to affect your credit report then your report will stay low. You can file a complaint to the Consumer Financial Protection Bureau if you feel you are being treated unfairly or your problem is not being handled well.
Understanding your score
Clearly something bad on your credit report will have a bad effect on your credit score. FICO invented the algorithm of determining peoples’ credit scores. This algorithm is made up of the five following sections:
- Your payment history -35% of your score
- The total amount that you owe – 30% of your score
- Your credit history or How long you’ve had credit – 15% of your score
- Any Inquiries and new accounts – 10% of your score
- Types of credit you have used – 10% of your score
Most of these sections speak for themselves, except how much you owe. This section is not made up of your total debt. It is actually made up of a debt to credit ratio. Creditors may be very reluctant to increase credit limits or approve loans if you are currently struggling with debt or you have a low credit score.
It is fairly easy to get your credit score. To get your FICO score you can go on www.myfico.com. You can also get your credit score directly from one of the three credit bureaus. The three credit bureaus are Experian, Equifax and TransUnion. All three of your credit reports can also be found in one place at www.anualcreditreport.com. Keeping track of your report and your score can greatly help.