Credit Reports are an important tool used by the industry to get a snapshot of your financial history. Understanding the process for reviewing, disputing, and resolving information on your report is a critical part of your financial health.
What’s in your Credit Report?
Credit Reports are usually only reviewed when people are planning a major upcoming life event. Obtaining a mortgage or consumer loan, applying for a credit card, background check for employment, being the victim of identity theft, and obtaining or changing insurance policies are all things that could trigger a review of your credit report. Many of us treat our credit reports as “out of sight, out of mind”. Experts say that is a mistake. Your credit report details how you handle your debt and is used by lenders to determine how big of a risk you are when lending you money. The information in your report leads directly to your credit score (a three-digit number) which is a big factor in determining interest rates, terms, and other aspects of any loan. Reviewing your report at least once a year can help you negotiate better terms by being educated on what to expect from any lender.
Here are a few things to know about credit reports:
Annualcreditreport.com is the only government-authorized website for the free annual credit report that you are guaranteed by law. Experian, TransUnion, and Equifax are the three major credit bureaus. It’s important to know the different bureaus are used by each lender, so pulling from all three will give you access to ALL of your information and verify the information is accurate. Requesting your information online is very straightforward and is as simple as providing basic data such as your name, address (both past and present), social security number, date of birth, etc.
Credit reports include four sections:
- Identifying information: This is where you will find your name, social security number, current and former addresses, phone number and other personal information.
- Credit history: This is your complete borrowing history, including every loan you’ve ever had and whether you paid on time. You’ll also find information such as creditor names, account activity, account number, credit limit, minimum monthly payment and current balance.
- Public Records: This is where negative credit information like bankruptcies, liens and court judgments are listed. Negative information can remain on your report for up to seven years. Keeping items off this section is a key part of maintaining a high score.
- Inquiries: This is triggered when your credit report is pulled. Inquiries fall into two categories: hard pull or soft pull. Hard pull inquiries are when potential lenders pull your report when you apply for a loan. They can temporarily lower your credit score by up to five points. Soft pull inquiries are when a person or company checks your report as part of a background check. Soft inquiries don’t affect your credit at all, so don’t worry about frequently checking your own credit reports.
Things to look for: According to the Consumer Financial Protection Bureau, be on the lookout for these common reporting mistakes:
- Identity errors: Is there a phone number, address or name you don’t recognize?
- Accounts that don’t belong to you. Occasionally someone else’s information with a similar name could inadvertently appear on your report.
- Accounts opened as a result of identity theft.
- Incorrect account status: This includes closed accounts reported as open, you being listed as an account owner rather than authorized user, duplication of debt, and/or wrong opening, payment or delinquency date.
- Right account number but wrong balance or credit limit listed. (Keep in mind your balance is fluid so this could simply be the result of when the report was pulled)
How to fix errors: First, you’ll want to contact the credit bureau that has the error. This can be accomplished online, over the phone, or by mail. Always keep good records and copies regardless of the method you choose. Explain in detail why the information is wrong and include copies of any supporting documentation. Once it is received the bureaus will, in general, investigate and respond within 45 days. If for any reason your dispute is ruled “frivolous” you’ll be notified within five days. This can happen if someone tries to dispute clearly accurate information and is simply trying to “game” the system. In the case of a factual error you will also want to file a dispute with the company that made the mistake so they can provide updated information to the credit bureaus. If they made the error, it is their responsibility to contact the credit bureaus and provide the corrected information.
If the investigation is not in your favor, you have two choices.
- Ask that your disputed claim summary be included in your credit report, or
- File a complaint with the CFPB at www.consumerfinance.gov/complaint.
Maintaining an accurate Credit Report begins with simply reviewing it on a yearly basis. This will help you obtain favorable financing, get discounts on insurance products, and improve your overall financial health.