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Credit Report 101

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Ever wonder what lenders and creditors look for when they look at your credit report. Most people in the United States don’t even know where they can get their credit report. Here is some helpful information to help you better understand what your credit report means, which might want to look at it and where you can your credit report.

Currently in the United States there are three major Credit Reporting Agencies where you can access you credit information, TransUnion, Equifax and Experian. Experian is formerly known as TRW. These credit-reporting agencies work hand in hand with lenders, credits and employers and distribute your credit information.

But how does the system work? Here are some examples of how the credit process works.
1. When you submit an application for a credit card, the creditor runs a credit check on your to find out your credit history for 3 credit report agencies.
2. Then the creditor uses this information to then determine if a credit card will be issued to you and if so at what rate.
3. If issued a card then when you begin using your card, your credit card activity is reported to the credit reporting agencies every 30 days.
4. As information is received your account is updated
5. Your credit profile changes based on your financial activity. Each time your apply for some form of credit this process is repeated.

Your credit report itself is divided into six sections:


1. Consumer Information – address, birthday, and employment
2. Consumer Statement
3. Account Histories
4. Public Records
5. Inquiries
6. Creditor Contacts


As new information is received, you file will be updated and changes may be made to each section of your credit report. Old reports will stay on your file for about 7 years. Not all creditor report information to all three credit reporting agencies, so when looking for your credit report it is a good idea to look at all three agencies to ensure accurate up to date information.

How to correct inaccuracies

If after viewing your report you find mistakes in your credit report there is a process that you can follow in order to correct these mistakes. If you find inaccurate information you can contact the creditor or lender associated with the mistake. These companies can usually correct the mistake. If the problem cannot be solved then you can take your issue directly to the credit reporting agencies

Keeping a healthy credit report

You should check your credit report every 3-6 months. This will help guard against any damaging inaccuracies. It is very important to keep your credit history clean. This will help improves your credit scores and help you get he best rates on major purchases. There are several things that you can do to keep your credit report healthy. You can make it a routine to check your credit report, make payments on time, keep you credit card balances below 35% of their limits and you should always make every effort to correct any negative inaccuracies

 

Credit Report Myths

Over time several myths have been created that deal with what you should or shouldn’t do to improve your credit reports and scores. Below are several urban legends and the truth associated with them.


Your Score Will Drop If You Check Your Credit - False

Checking your own personal report is called a “soft inquiry”. This type of inquiry does not affect you credit report in any way. The types of inquiries that can be damaging to your report are known as “hard inquiries”, which come from a lender or a creditor. These hard inquiries can bring your scored down a few points. When looking around for a loan it is a good idea to do all of your shopping around at the same time. Multiple inquiries for the same purpose can be less damaging to your report and score.

Closing Old Accounts Will Improve Your Credit Score – False

In actual fact closing old accounts can be damaging to your credit reports and scores. Canceling old credit cards and accounts can lower your credit score because it can make your credit history appear shorter. (A longer credit history is usually considered better than having a short credit history.). If you are considering closing an account you should think about what you are doing. The suggested thing to do is to ask your lender or creditor to lower your credit limits and not close your account.

Paying Off A Negative Report Removes It From Your Account – False

Negatives reports such as collection amounts, charge-offs and bankruptcies remain on your account for at least seven years no matter if they have been paid off or not. The only thing that changes is that the account will be marked as paid on your file. Paying off the account will help improve your credit report but it will not remove it until the mandatory seven-year period has expired.

Being A Co-signer Doesn’t Make You Responsible For The Account – False

The purpose of a co-signer is that in case the primary person on the loan or credit card cannot make the payments then co-signer will be made to make the payments. Therefore this co-signer is in fact responsible for the account in some way, the responsibility is shared. Any activity on the shared account will show up on both people’s credit reports. The only way to stop your account from being affected is to refinance the loan or have your name officially removed from the account.

Paying Off A Debt Will Add 50 Points To Your Credit Score - False

It is impossible to predict how many points you will receive if you pay off any account. There is in fact no magical way of improving your credit score or credit report. You should pay your bills on time, reduce your debts and remove negative inaccuracies in your credit report.

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