Understand the credit report DNA

Credit report with score on a desk
Credit report with score on a desk

Credit report forms the basis of all the major financial decisions of your life. Keeping a track of the entries and getting the discrepancies rectified in time can help you maintain a good credit score.

As you know, credit report is the main factor when it comes to the decision related to your financial credibility. Almost all the lenders and the banks look at the credit reports of the individuals before making a lending decision. In fact these credit reports have gained their importance into decisions related to accommodation, employment and other similar activities. Thus, it makes a lot of sense into understanding the way the credit reports are made, the entries into it and the way you can get them corrected.

In today’s world, there are many sources from where a person can avail loans for their personal use or business use such as banks, credit unions, credit card companies, financial institutions, private lenders etc.. Credit reports were introduced with a perspective to let the loans for people with bad credit lenders know about the individual who is asking for loan is trustworthy or not. Credit reports consist of the credit history of the individuals which has complete details of the financial transaction made by the individuals. By looking at the credit scores of people, lenders decide that whether they should lend the money to those who are in need and what should be the interest rate charged from them. All these financial transactions are recorded in credit history of the individuals where they study individual’s behavior regarding finances and then credit score is derived accordingly.

Anatomy of a Credit Report

While going through credit report, a person should keep in mind that they should clearly study their credit report. All the information and the details repeated to your identity and the financial transactions and the obligations that you hole needs a thorough check. Even mistakes like spelling , wrong names, address which might look to be trivial in the first go can have devastating effect on your credit score and hence it is better that you bring these to the notice of the credit bureau and get them corrected well in time.

The information which might get wrong in the credit reports is like personal information which consists of common things like name, address, employments status, monthly revenue. Even if there is any partnership or joint venture then these information will also be noted in this category.

The second information which a person should check in their credit report is the credit information like the ongoing mortgage; credit card balances any other installments. One should check if there is no unknown credit account on their credit report which they are simply not aware of.

The third information which is the most important is the list of all his credit account which you have  opened till date. This include all the information of the credit which is taken by people like the nature of loan, reason of loan, lender, monthly payment, total amount paid, total amount left to be paid. A person should check all this information and if there is any sort of mistakes in any of this information then they should immediately get it rectified by the credit reporting agency as not doing so will reduce the credit score of a person.

In the forth category all the public records are mentioned like if any lawsuit is against you by lender, bankruptcy or foreclosure.

And the last thing which is mentioned in your credit report are enquires which are done for your credit reports and the new credit. All these information you can avail from credit reporting agencies for free but once in a year.

Credit Report Dispute

Looking at the five facets of the credit report, one can easily understand that even the slightest of mistakes in them can have devastating impact on the credit score. One may have to pay huge amount as fees and towards penalties. It is therefore mandatory that you get a copy of your credit report from each of the three credit bureaus every quarter and run a check on the details of the report. Any discrepancy needs to be reported to the bureau in an official manner.

You need to send a dispute letter to the bureau mentioning the details of the discrepancy and attaching documents regarding the proof of the same. Credit bureaus are dealing with the credit report of millions of individuals and hence it may take some time before your request is attended. However, you need to make regular follow-ups and see if you are being heard within a time frame of 30days from the day you lodged your request or complaint. it might be painful at times but looking at the kind of impact it has on the credit scores, it is worth taking it.

Factors That Negate Credit Report Scores

There are many factors which affect your credit score negatively:

1)     The money which are paid against the tax debt, lien or any court judgment.

2)     The number of unnecessary credit account opened.

3)     The number of hard credit enquires made on your credit report.

 

Checking credit report from time to time is very important as there are times when by mistake credit reporting agencies make any unnecessary additions or wrong entries in your account which you haven’t taken and there is no payment made by you against it and it decreases your credit score. Even if any fraudulent activity is done on your credit report by any person it can be traced by you easily if you check your credit report within specific time period in a year.

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