A credit report is a person's history of loans, debts, bill payments, etc. It contains information about your personal financial situation and about any lawsuit, arrest or bankruptcy filing that you may have been involved in. Since the credit report holds a great deal of information, you need to check it regularly for accuracy. If you find errors about your personal information or your financial accounts, you need to have them corrected as soon as possible, before they affect your prospects.
The Three Major Credit Reporting Agencies
The Credit Reporting Agency (CRA) is a company that issues credit reports, which consist of information on your place of work or living, on the way you pay your bills and on your past convictions, arrests and court cases. There are three major credit-reporting agencies: Equifax, Experian and TransUnion. All of these three agencies offer one free copy of your credit report per year. They are also allowed to sell your credit report to any company that needs a copy of it, in order to extend your credit, hire you for a job or lower your insurance premiums.
Free Credit Reports
Any individual can order a free credit report once a year, requesting it from any of the three major credit-reporting agencies. You can either request all three reports at the same time, or at any point you desire during the 12-month period. There are three ways of ordering your free credit reports: online, by mail and by phone. However, you need to remember that you can only order a free credit report, which does not include your free credit score.
Customers often confuse credit reports and credit scores. A credit report, on the one hand, is a history document containing all the information on your credit cards and loans. It is a complete report of your account, payment history, balance and credit limit. A credit score, on the other hand, is a three-digit number that is calculated based on the details of your credit report.
The factors that influence your credit score are:
- The credit amount you use.
- The number of years you have had credit.
- The late payments you have made.
- The number of negative actions you have had.
Remember that the lower your credit score is, the lower your chances are to get credit. You are advised to keep your credit score between 750 and 850. If your score gets below 450, you incur a serious risk of having your credit denied.
Negative Information on Credit Reports
The negative data on your credit report and the length of time it remains there are important issues to consider when applying for credit. The credit reporting company will keep negative information (such as lawsuits and judgments made against you) on your credit report for seven years, while any information about your bankruptcy will remain for 10 years. In any case, certain pieces of information will remain on your report permanently:
- Criminal convictions
- Applications for jobs of more than $75,000 per year
- Credit or life insurance policies worth more than $150,000
Errors on Credit Reports and Ways to Correct Them
In the event you spot an error on your credit report, you need to contact either the credit-reporting company or the company’s specified information provider to resolve the issue. To do so, you may simply write down the piece of inaccurate information and submit it to the credit-reporting agency. The agency will then check the problem within 30 days. They will contact the information provider and investigate why and where the mistake occurred. Finally, once the inaccurate piece of data is located, your credit-reporting company will notify all three major credit-reporting agencies and have them correct the information as well.