Demystifying Credit Reports What You Need to Know

 Demystifying Credit Reports What You Need to Know

 

Credit reports are important records in your life as they determine your credit worthiness in very many ways. For purposes such as loans, apartment leasing, or even employment, credit report is a very important tool that is used when determining the credibility of an individual. However, consumers have often stated that they have a hard time dealing with credit reports since most of the time, they are complex. In this easy to understand guide we will explain how credit reports are formulated, the purpose behind them, and how you can use them to your benefit.

What Does Credit Report Mean?

Credit report is therefore a detailed report of the credit worthiness of an individual together with other personal conduct in financial matters. It is the record about your credit accounts, payment behaviour, current balances, credit transactions and more. Credit reports are utilized by the lenders, landlords and employers to evaluate your credit history as to whether or not you are capable of managing debt and making payments.

There are four important factors that make up a credit report;

It is therefore helpful to know what the major elements of credit report are so that you can manage the credit and correct the things that may not be right. Here are the main sections typically found in a credit report:Here are the main sections typically found in a credit report:

1. **Personal Information**: Some of the data relating to you include your name, the address, social security number, date of birth and employment details. They have to be accurate as any mistake made here is recorded on your credit profile and can be a problem.

2. **Credit Accounts**: This section gives details of all your credit accounts such as credit cards, mortgages, auto loans and personal loans among others. Some of the data that can be included include the type of account, balance, credit limit, payment history and date of the account was created.

3. **Credit Inquiries**: Inquiries are reports of when your credit report was requested which can be a factor when determining credit scores. There are two types of inquiries:There are two types of inquiries:
– **Hard Inquiries**: They are common when you apply for a credit card or taking a loan. These affect your credit rating and could take to up to two years before they are cleared from your credit report.
– **Soft Inquiries**: This happen when you do a credit check yourself or when a firm does a credit check on you for instance when promoting a product. These do not impact on your credit score.

4. **Public Records**: It contains data about judgments, which were made against legal claims and bankruptcies together with other public information that can affect your creditworthiness. Some parts of the public records can actually, negatively impact your credit rating.

5. **Collections**: If you have any of the accounts which have been taken to the collections department due to non-payment, they will appear here. Collection accounts are bad for your credit score and can stay on your report for up to seven years.

How to get your credits report

You can request and receive one free credit report from each of the three major credit bureaus, namely Equifax, Experian and TransUnion within a year. You can get these reports on the official website AnnualCreditReport by making a request. com. Ideally it is advisable to check credit report from all three major credit bureaus since each of the bureaus may contain various information.

Demystifying Credit Reports: What You Need to Know

Demystifying Credit Reports: What You Need to Know

 

Understanding Your Credit Report

Here’s how to interpret the information on your credit report:Here’s how to interpret the information on your credit report:

– **Account Status**: This entails going through each of the credit accounts, to see the current state whether there are any issues or not. Account should be either open, closed or healthy. Such differences may signify that there is an error or fraudulent act in the processing of cash balances.

– **Payment History**: A couple of points to look at would be the payment history to see if there were any payment actions that were performed close to the credit limit or any missed payments. Such a move maintain may harm any credit scores likely to be scored for being often late in payments to show the possibility of economical hardship.

– **Credit Utilization**: Check your credit utilization rate – it shows how processed you are on your credit limit. Holding a high credit utilization ratio may suggest that one is using credit a lot and this may be detrimental to the credit score.

– **Credit Inquiries**: Surveil the section of inquiries to check for any hard inquiries that are not recognisable and could be attributable to fraudulent application for credit. If you notice any, follow them up as soon as you can.

– **Public Records and Collections**: Also, pay of any public records or collection accounts listed in your report. Some of the entries under these categories are damaging to your credit score hence require arrangement or clarification.

How to Address Errors on Your Credit Report

If there are mistakes on your credit reports then you might suffer from a low credit score and limited financing options. Here’s how to address and correct inaccuracies:Here’s how to address and correct inaccuracies:

1. **Identify Errors**: Be keen when you are going through your credit report in order to notice whether there are any problems or if it needs to be updated. Some of the common mistakes include; wrong account numbers, wrong balances, accounts, and even accounts that you do not own.

2. **Dispute Inaccuracies**: The recording which took place in the credit bureau reporting the mistake should be contacted to dispute the errors that they have made. In most cases, you can submit a dispute via the bureau’s website. RESULT Generally, there is lack of supporting documentation whereby the customers’ complaint is addressed by providing all necessary records to support the resolution.

3. **Follow Up**: After filing a dispute you should keep an eye on the credit report to check if the dispute was resolved. If one ever needs to dispute something on his record, credit bureaus are obliged to make the investigation within the 30 day and issue a response.

4. **Contact Creditors**: In case the error is account related, try to contact the creditor and seek for a solution. Give them sufficient paperwork and demand them to forward the information to the credit reporting agencies.

How to Improve Your Credit Report

As suggested earlier, to improve your credit report the right approach is to start practicing certain healthy financial behaviors and deal with any unfavorable situations. Here are some tips to enhance your credit report:Here are some tips to enhance your credit report:

1. **Pay Your Bills on Time**: One of the most important things about credit is that the payments have to be done on time and be consistent. Choose to pay automatically or put reminders in for you so that you will not be faced with the issue of paying something at the wrong time.

2. **Reduce Credit Utilization**: Ensure that you have low credit card balances to ensure that you do not have high credit card utilization ratio. Generally it is recommended that people should spend less than 30% of the credit limit.

3. **Avoid Opening Too Many New Accounts**: An application for new facilities is another reason which influences the credit score, as it causes a hard inquiry with every credit application. Do not use credit except in dire situations.

4. **Maintain a Diverse Credit Mix**: It is possible to combine credit card, installment loans, and retail store credit accounts if you want to have the most diversified credit history.

5. **Review Your Credit Report Regularly**: Always look at your credit report to ensure you verify your details and the credit score. Any irregularity mainly in payments must be resolved immediately so that a good credit report can be established the soonest possible, if not immediately.

Conclusion

Credit reports are a part of your financial situation and your financial future can be affected by reports. This way you got to know the factors on credit reports, how to retrieve and comprehend them, and steps on correcting deficiencies. Applying proper budgeting styles and being concerned about your credit report will assist you establish the right financial strategy towards success.