Read my previous post on credit reports and scores here.
Now that you know what a credit report is and why it's important, let's take a look at how to find out what your credit report says and what you can do to fix it.
First up: getting a free credit report. Everyone is allowed one copy of their credit report free from each of the three main bureaus each year. So that's a total of three free credit reports each year. Most people suggest utilizing this perk by checking your credit report once every 4 months, rotating between each of the bureaus. I often forget to check mine, but now that I’m writing about it, better believe I’m checking them right now.
The official place to go is www.annualcreditreport.com, which will link you to each of the bureaus, and will point out if you've already checked in with that particular bureau this year for your free report. I always forget which ones I've already checked, so this is helpful.
Additionally, you can get a copy of your report if you are denied a credit card or loan due to a company rejecting you based on information from the report. Usually if you receive a rejection letter, it will include information on how to see the particular report they looked at.
Checking your credit report is critical as there can be any number of mistakes present that will prevent you from getting a loan. Even worse, these mistakes may still allow you to get a loan, but at crappy interest rates, and you'll never know that an incorrect entry is costing you thousands.
Credit reports are pretty easy to understand. They include some basic information, which includes your birth year, your current and previous addresses, and current and previous employers. This is useful information, but the real good stuff is the information regarding your credit history. This part of the report lists all of the issuers of credit, how much you owe them, recent balances, total balances, and a slew of other information. This is the information you want to ensure is correct. This is what most companies are going to look at to see if you are handling your credit responsibly.
If you find an error, you have to contact that particular bureau directly and ask them to fix anything. It might take a little while, but it's definitely worth it. Your credit score is based on this information, so make sure it's correct.
While you can get a free copy of your credit reports, it's not so easy to do the same with your credit score. Companies love to charge people to view this, and most will sign you up for a credit monitoring service, which may or may not be necessary. Many credit card companies now offer the ability to see a credit score, though depending on the company it may or may not be the same score used by a potential lender.
The say time heals all wounds, and it's pretty much the same for your credit report. Pretty much anything that you've done prior to 7 years ago will fall off of your report and become irrelevant. Bankruptcy remains on your report for 10 years, and severely limits your ability to acquire new credit, but even that too will eventually fall off. Those are long time limits, but the good news is that after 2 years, most problems have less of an effect on your credit score. So if you start paying bills on time, stop opening new credit cards, and start to manage debt responsibly, within 2 years you will be well on your way to becoming an upstanding credit citizen.
There is a lot of information about credit reports, specifically how much each part counts, i.e. paying on time, outstanding debt, and debt to credit limit ratios, so if you are curious take a look around online.
Use your credit wisely or not at all.