My Credit Report
What To
Look For In Your Credit Report
This web page explains what to look for when
you order a copy of your credit report.
One of the ways that the Internet is helping
consumers is that it makes it easy to order
a copy of your credit report. This can
be useful information when you are getting
ready to apply for a mortgage loan, or just
to give you a general idea about where you
stand from a credit perspective.
What You Will See
The major credit repositories collect three
types of information. What you see
will include whatever applies to you in all
three areas:
1. Public
Record Data.
This usually is stuff that is not good.
The term "public record" means information
that is recorded by government authorities,
including courts. So, if you have
declared bankruptcy, or there is a tax lien
on property that you own, or there is some
other financial matter in which a court or
government agency has recorded an action
against you, this will show up in the search
of public records.
If
you have adverse public record information,
this does not preclude you from getting a
loan, but it does make it difficult to be
rated as an "A" borrow (a term often used to
describe people whose credit is viewed as
low risk by lenders). Once the issue
has been resolved, after 5 years have passed
you often can restore a low-risk credit
rating. In the meantime, you probably
will have to write a letter to any potential
lender to explain the situation (lenders
call these "cry letters").
2. Trade
Lines.
A
trade line is a status report on an existing
account where you have credit, such as a
store charge card or major credit card.
The lenders with whom you have these
accounts voluntarily supply the status
information to the major repositories of
credit information.
A
trade line covers an account that you now
have that gives you either installment
credit (a fixed loan that you pay off in
regular installments) or revolving credit (a
loan whose amount can vary depending on
purchases, such as a major credit card or
department store credit card). The
credit report will show whether you are
current or behind payments on the account,
and it will show how often you have fallen
behind within the recent past (usually one
year or three years).
If
the trade line section shows only 1 or 2
missed payments, and no current
delinquencies, you are fine. If it
shows you as being currently delinquent, it
is strongly recommended that you remedy the
situation before you apply for a new credit,
such as a mortgage loan.
3.
Inquiries.
This shows recent inquiries made to the
credit reporting company by companies from
whom you have requested a credit card or
some other form of credit.
What You Won't See
What you will not see is your overall credit
rating. There are companies that are
separate from the credit repositories but
who work closely with them to produce
overall credit ratings for individuals,
called credit scores. Credit scores
are used increasingly by mortgage lenders to
make decisions. See
Your Credit Scores
on this web site.
For now, the credit scoring companies resist
giving credit scores directly to consumers
(a lender who pulls your credit score may
choose to reveal your credit score to you,
but the lender is not obliged to do so).
Fair Isaac, the leading credit scoring
company, justifies this by saying that "the
number by itself might not hold much meaning
to you."
Imagine a teacher trying to justify keeping
your grade a secret because "the number by
itself might not hold much meaning to you."
In our opinion, Fair Isaac is showing
condescension and arrogance in their
attitude.
As
of today, we know of no way for consumers to
request their own credit scores. Only
if a lender is willing to provide your score
can you obtain it. Meanwhile, here are
some guidelines about credit scores:
1. Public record data that is less
than 5 years old can have a sever impact on
your credit score.
2. Credit accounts that currently are delinquent
can have a major adverse impact on your
credit score.
3. A track record of "serious delinquencies" (90
days or more) can have a major adverse
impact on your
credit score.
4. A high "utilization rate" (your current credit
balances use up most of your available
credit) can have an
adverse impact on your
credit score.
5. A large number of recent inquiries (indicating
that perhaps you are aggressively seeking
credit) can
have a modest adverse
impact on your credit score.
What To Do with Your
Credit Report
1. Review the report for accuracy.
Be particularly careful to check your
personal identification
information. If the
report uses a misspelled name, address, or
social security number, this is
important to get
straightened out.
2. See if there are issues in the report that
could create problems in your credit rating.
3. Try to resolve the issues that you can--for
example, by paying off any accounts that
currently are
delinquent, or reducing
your utilization rate.
If
the report has inaccuracies, then you may
wish to contact all three major credit
repositories, in order to clear up the
issues as quickly as possible.
Here are their web sites.
Equifax
Experian
Trans Union
What Not To
Do
● Do not pay a credit doctor to "fix"
your credit report--those services are
scams. But do examine your
report carefully for errors,
because correcting errors can prevent major
problems.
● Be careful about signing up for a service to
"monitor" your credit report. These
services are fairly
expensive, and often they use a
"free" copy of your credit report as a loss
leader. Personally we would
never pay the $50 a year or
more that these services charge.
● Try to avoid over-paying for a credit report.
The standard prices we have seen are about
$10 or less
for a report from one
credit repository, and about $30 for a
report from all three. If you have no
reason
to suspect that there are
errors in your credit report, then our
advice would be to buy the $10 report
that comes from one
repository. If that report turns out
to require corrections, then you can go back
and order a 3-repository
report.
