Have you seen your credit report recently? Chances are you haven’t. You may not even know the relevance or significance this report has, well here’s to opening your eyes.

Your credit report is your financial history in regards to lending and spending habits. You may not be looking at your credit report but others have and probably will in the near future. You may not know it but everyone from new employers, insurance providers and banks all look at it, and you need to know what they’re looking at!

Why Should I Care About My Credit Report?

The impact a clean or tarnished credit report can have is more wide spread than you would think. It can affect anything from car insurance rates, to interest rates on loans or standard Lines of Credit to something as trivial as a denial on services such as cell phone coverage. The worst part of all of this, inaccuracies on a credit report are not as rare as you would think.

In 2004 a survey by U.S. PIRG, (Public Interest Research Groups) Found that 1 in 4 credit reports found errors serious enough to result in denial of credit. 1 in 4! How can you fix your report if you have not seen it. Your report includes information regarding from credit cards, balances and anything financial. Sometimes mix ups occur with people with similar names or addresses, and since lenders have no obligation to share information, reports can be missing information all together.

It’s been estimated that 60% of those looking for a loan have not seen their report, and many have errors. This could be a threat to a possible mortgage.

How Can I Obtain My Own Credit Report

Equifax, Experian and TransUnion are three companies that work in credit reports, they gather information and then sell it back to you for a price. However, you are entitled to one free credit report per year per company. With some exceptions if you are; victim of identity theft or denied for insurance or loan app.

AnnualCreditReport.com is the easiest way to gain access to your reports. There are other sites, but this one is proven safe and why wander into unsafe territory, especially since to receive your report you must enter sensitive information such as your Social Security Number along with birth date and any other information they choose to ask to verify your identity.

Once you have been accepted you choose the company you wish to receive your report from, Equifax, Experian or TransUnion. You verify more information to confirm your identity. Once verified you will be taken to your report. If you are not computer savvy you can call 877-322-8228 instead to get your report, this could take up to 15 days however.

Anything Else I should Be Aware Of?

Beware, each company will be trying to up sell you along the way. They are a business after all. It does cost about $10 for each report after the first one. Another thing you may be interested in is your credit score. This is a number that ranges from 300-850 based on your credit report. It basically is an interpretation of what your credit reports means to a company, this is an important piece of information to know as numbers are easy to relate to. Keep the number high and you know your credit is good. Here’s to keeping that number up.

When Diners Club first launched their charge-card in 1949, no one would have believed what the knock-on effect would be. US citizens spend more than $2 trillion annually on credit cards more than they spend in cash. Creditworthiness has become an issue for everyone.

Most people know that creditworthiness is tracked using a credit report; however few understand how the scoring works. Scores range from 300 points: highest risk, to 850 points: lowest risk, on FICO.

The FICO system was developed by Fair Isaac & Co, and used to evaluate the probability that customers will meet payment on their bills. This score is used in the US by Equifax and is the deciding factor for over 75% of applications for credit. Bear in mind that in 2003, practically 50% of Americans had FICO scores between 700 and 800.

The mathematical determination for FICO scores uses five factors: current debts, previous credit performance, credit tenure: how long you have had credit, the kinds of credit to be had and the pursuit of new credit.

What appears on The Report and Why Should it Matter?

When looking in depth at an Equifax report, it is split into seven sections. These provide an overview from the major credit reporting bureaus.

The first section encompasses personal information like present and previous addresses, employment history and social security number. This information is crucial for identity thieves, so be sure to protect it. Confirm it is correct then shred it before discarding.

The second part contains an abridged account of your credit history, including the type and number of accounts, both existing and closed, and whether these accounts are in good standing. It also gives details of all your credit inquiries for the past year.

It might appear as though the more accounts you have, the better your credit score, this is not necessarily the case, more is not always better.

Financial institutions generally assume you will use all your available credit and factor the payments that would be needed to service the debt. You might have a dozen cards with zero balances and have no problem meeting a $2 000 monthly mortgage payment, however if the bank calculates the ability of you to make payments on these cards, your creditworthiness is lessened.

The third section of the report provides comprehensive account data, including the name, opening date, balance, type, number, and status of every account you have. An analysis of every account entails date of last activity, payment history and contact information. If you see discrepancies in this information, you must challenge it. According to federal law, the credit agency has 30 days to respond to your query. If your dispute is successful, the incorrect information will be removed from the report.

The fourth part of the report contains inquiries regarding your credit history. inquiries are referred to as “hard” or “soft”. Hard inquiries are produced when you give authority to companies to access your credit report.

These are carefully tracked, if a large amount of them appear in any one-year period, it will have a negative affect on your FICO score. Soft inquiries are produced when current creditors verify your credit status, if card issuers re-evaluate your file without being asked to and also when you check your credit. Soft inquiries do not influence your credit report.

The fifth part of the report contains details about accounts that have been handed over to credit agencies and the sixth provides data about liens, wage garnishees or judgments against you in all court records.

The final part of the report outlines how to you can dispute information provided by your credit report. Regardless of claims on infomercials, there is little that can be done about delinquent accounts.

The Federal Trade Commission says this information remains on your credit report for a seven year period, bankruptcy ten years and lawsuit-related data, until the suit is settled. No one needs these problems so ensure payments are made in time and tackle credit issues without delay.

How Credit Report Information Impacts on Your Score

Equifax refer to missed or late payments, length of credit tenure as well as the account balance relative to credit limits as the major factors influencing your FICO score. You may have a good income and pay your cards in full every month, but large balances may affect your score negatively.

Additionally, if you don’t have a mortgage, car repayments or current revolving debt it is highly unlikely that your FICO score will be as high as 850.

How to Check Your Credit Score

Credit score reports are available online instantly for less than $50. When contemplating an important purchase like property, process a credit check at least ninety days prior to your anticipated purchase. This will allow ample time to deal with discrepancies appearing on the report.

Equifax, Experian and Trans Union are the three major credit bureaus used in the US. They are independent operations, so you should request for a credit report from each one to obtain a complete illustration of your credit history.

In Conclusion

Prevention is the best possible cure despite advertisements that guarantee to repair bad credit. If credit information is accurate, there is very little that can be done to remove negative information from your report, you will have to wait 7-10 years. So prevent harmful information from appearing on your credit report in the first place. This will ensure your ability to obtain future finance.

Right now, according to the media there is nothing more important than having a strong solid credit score. The current economic situation has made the money that used to be available to borrow to help people pay for mortgages or credit cards, are nowadays hard to obtain is your credit score is far away from perfect.

Sadly, many consumers do not know that a weak credit rating affects the ability to borrow money from others as well as its effects on many other aspects of daily life.

For example, credit rates play a big part in how high or low insurance rates are. A lot of homeowners insurance companies no longer write policies for those who the company feels are at a risk of defaulting and not paying on time.

If you are applying for a job with a low credit score, many employers check your credit reports and some of them often deny employment for people who have bad credit. Employers back this up saying that if a person is not able to be responsible for bills, then he/she will not value the job and will not meet the standards that are needed. Credit scores affect everything from jobs to insurance, so be aware of what your credit score is.

What can I do to improve my credit score?

With a credit score, the biggest positive is that you can always improve it. The first step you need to take in improving your score is to to begin paying your bills on-time. Do this before starting to find out what is listed on all of your credit reports.

Your lenders report your credit habits to three main bureaus. The information that is collected from these reports is the date accounts are opened in your name, the credit limit on the accounts, the account type, and how pay for your account. This data determines what your FICO score is.

How do I receive my credit report?

Today, there are many great modern tools that allow you to quickly and easily obtain a copy of your credit report. You can receive your report from all three agencies all at the same time. Today, the federal government offers a program that lets people get of copy of their credit report each year without any cost.

You can quickly print out all of your reports and check them for any inaccuracies that may have occurred.

If you find something that just doesn’t look right, you should definitely notify each credit bureau in writing. Have them look into it and figure out what is wrong. If something is in fact wrong, they will remove it from the report and then raise your credit score.

Try to avoid the Common Mistakes that Many Make

Many times, people who are trying very hard to improve upon their credit score wind up unknowingly making it go even lower. An example of this is when you analyze one of your credit reports and you notice a credit card that you do not use as much anymore, so you immediately close the account of the credit card.

This is a huge mistake on the consumers part.

If the account is in great standing and it has been for awhile, this helps to elevate your credit score. Even if one of your credit cards become idle, if the account is in good standing do not close it. Also, make sure you do not have high balances on any of your credit lines.

On average, you should have nothing more than 40% over your credit line outstanding during a single time period. Anything that goes over the line will negatively affect your score.

When you try to improve your credit score, there are many ways to do it. Just be sure that you do not fall into the common mistakes that many people do. Once you build up your credit to a great score, you will notice you have many new opportunities to choose from.