How to use your credit report to deal with your credit score

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Credit History
Credit History

If you want to improve your credit score, you need to go right to the source – your credit report.  Your credit report contains the information and data on which your credit score is based.  If you can alter or update the information in your credit report, your credit score will change to reflect the alterations.  For this reason, getting and checking you credit report is one of the first things you should do when you attempt to repair your credit score.  There are a few tips that can help you deal with your credit report so that you can give your credit score a boost:

Contact each of the three major credit bureaus –  TransUnion, Equifax, and Experian – and get copies of your credit reports and credit scores.  Carefully read over the reports and note any errors.  In writing, contact the credit bureaus and ask that mistakes be removed or investigated.

This is called a dispute letter and once it is received, credit bureaus have to investigate your dispute within thirty days of receiving your letter.  It is important to keep a copy of your letter and it is important to note the date the letter was sent.  You should not be accusatory or abusive in your letter – calmly and clearly state the problem and request an investigation.

Note that you are aware the agency is required to investigate the claim within thirty days and note that you will follow up.  Be sure that you do follow up with the issues you raised in your letter – just because the agency investigates does not always mean that your credit report will end up error-free.

Many credit bureaus now make it possible for you to correct errors on your credit report online – and many have information on their web sites that tells you exactly how disputes must be handled to be effectively removed.  It is important that you follow this information exactly so that the inaccuracies on your credit report are removed promptly and your credit score is updated as soon as possible.

Sometimes, there are legitimate reasons why you didn’t pay a bill.  If a contractor refused to finish a job or did a poor job, then you may have refused payment, but the non-payment may still count against you on your credit report.  If there are any unusual circumstances surrounding your credit report that may affect your credit rating – such as a case of identity theft – you can ask that a note be attached to your credit report to explain the problem.

Some lenders will pay attention to this and some will not, but it is a better solution than nothing at all.  Such a note will not affect your credit score but will affect your credit report. More importantly, it leaves a paper trail of the problem that lenders can look at if they choose.

Many inquiries look bad on your credit report, but more than that you likely want to know who can see your personal financial information, now that you know that your personal information is stored in a credit report.  If you sign a document with a lender or apply for credit online, you can be sure that someone is looking at your credit report.

However, you may want to look over other documents in order to see who is taking a peek.  Insurance agents will often look at your credit report, for example.  Some landlords and potential employers will, too.  You need to be careful about online sources, too.  In general, when you provide someone with your social insurance number, you may be giving permission to look at your credit report.  You shouldn’t bar people from looking, but knowing who is looking is good financial practice.

When you pull your credit report to look at it, it is counted as a “soft inquiry.”  Only “hard inquiries” from lenders will affect your credit score dramatically.  Although checking your credit score too often is an expensive habit, you should not avoid checking your credit report because you fear it will make your credit rating worse.

When debtors find mistakes on their credit report, they often only contact the credit bureaus.  While this is the most effective way to resolve the issue, you should in some cases contact the creditors whose account has caused a ding on your credit report.  This can help future dings and resolve problems faster.

Consider an example: Let’s say that you were late sending a credit card payment two months ago because you were sick.  The late payment is listed as a ding on your credit report even though you have paid it already.  You should contact the credit bureau in order to get the error removed.

However, if you notice that the same credit card company has you listed as having late payments three months when you paid on time, then it is time to contact the credit company and ask how to resolve the problem.

The information reported about you to credit bureaus should be accurate – if it is not, then the credit company should work to make sure that they correct the problem so that it does not happen again.  You have an advantage in this – the credit company, unlike the credit bureau, depends on your business for their money.

This means that the credit company (or any other bill company presenting inaccurate information about you) is well motivated to correct the problem or risk losing you as a client.

If you find that a company consistently reports inaccurate information about you to credit bureaus, consider making a formal complaint to the company about it or switch companies.  There is no reason why one company’s poor organization should cost you your good credit score.

You can get your credit score from any number of resources.  One place you can get it from is from credit bureaus themselves.  You can pay for the service, but you qualify for one free credit report a year or qualify for a free credit report if you have recently been turned down for credit or if you think you may have been the victim of identity theft.

If you can, get a copy of your free credit report from each of the three major credit bureaus.  If you can’t get a free credit report, you should still try to get one, even if costs a few dollars.  The savings you will enjoy on your loan rates when you improve your credit score will more than pay for the cost of the reports.

There are a number of online companies that offer free online credit reports.  These offers are very attractive because you get an online report without having to wait for a report to be sent to you, and you often can get several reports from the different credit bureaus at once, which can save you time.

However, these online companies vary widely, so you will want to compare a few different firms before choosing one.  You will also need to read the online company’s agreement very carefully – some promise free credit reports only with the purchase of a credit repair program or some other kit.  In some cases, you can decline the offer and still get the report but in other cases you cannot.

Buyer beware.

Also, some companies will offer you free credit reports that are really a combination of reports from the three major credit bureaus.  This is not useful, since you will want to compare each of the three credit bureau reports and fix each credit score separately.  You will want to look out for online companies that offer credit reports that are very condensed and you will want to avoid companies that will spam you (send you unsolicited emails) trying to get you to subscribe to some service.  Always read carefully to see whether the free credit report offer is legitimate.

That said, there are a number of online companies that offer credit reports and credit scores at no charge and these can be a useful way for you to start your credit repair, especially if you are comfortable around computers.

If you don’t qualify for a free credit report from the credit bureaus, a legitimate online company may be your best bet of getting your credit information so that you can start repairing your credit risk rating.

You do qualify for one free credit report per year.  You can get this credit report through email at www.annualcreditreport.com or by calling 877_322_8228.

You can also ask for your free credit report by mail by sending a letter to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348_5281 or by filling out the form available at the Federal Trade Commission’s Web site at: http://www.ftc.gov/bcp/conline/edcams/credit/docs/fact_act_request_form.pdf.

No matter where you get your credit score and credit report, make sure that you get the most complete information package you can. Credit reports are not very exciting or even easy to read.  If you are ordering your report online, look for one that includes graphs or lots of details that are easy to understand.

Make sure that you get both your credit report and your credit score – even if you have to pay extra.  If you get just your report, you will not be able to follow the secret and complicated math formulas used to arrive at your score and the report itself will not make as much financial sense to you if you don’t have your score in front of you, as well.

When you do get your credit report you will notice that it contains lots if information about you, including:

1) Your personal and contact information.  This will include your name and your address, as well as your past several addresses, your social insurance number, your employers (past and present) and your birth date.

2) Your personal information about credit.  A credit report notes all the details of your loans, including the types of loans you have now and have recently had, the dates these loans were opened, the credit limit on each loan, how well you have been repaying those loans (this is important – skipped or late payments count heavily against you in your credit score), and who your lenders are.

3) Information about you that is on the public record.  This may include bankruptcies, unpaid taxes, unpaid child support, tax liens, your dealings with collection agencies, foreclosures, loan defaults, civil lawsuits that you have been involved in, and other information.  Much of this will stay on your credit report and will seriously affect your credit score.

4) Information about who has looked at your credit report and credit score.  Every time that someone looks at your credit score it is called an “inquiry.”  Your credit report lists who has looked at your credit report in the past two years and how often you have applied for loans and credit in that period of time.  Too many inquiries tends to look bad and tends to affect your credit score.

When you get your credit report, it is important that you look at all parts of your credit report and understand what you are reading.  Mistakes in any area of your credit report can affect your score, so be sure to check the entire report for inaccuracies and errors.

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