If you are like most consumers, you probably know that your credit report and credit score are important. But you may not fully understand what is actually contained in a credit report and how it can affect you financially. Your credit history is important to many people: prospective employers, mortgage lenders, utility companies, landlords, and more. You owe it to yourself to understand your credit report and know what influences your credit score.
There are three main credit bureaus that gather financial information about you that is included in your credit report. They are Equifax, TransUnion, and Experian. Your creditors- mortgage companies, loan companies, store credit accounts, and credit card lenders- all submit payment information to the credit bureaus every month. The credit bureaus then use this information to calculate your credit score. It's important to remember that your credit score is always changing. For example, newly opened accounts, late payments, or numerous inquiries can all affect your score.
The following information is normally included in your credit report:
Any time you apply for new credit, such as a credit card or car loan, that company will most likely look at your credit report to determine your creditworthiness. Others who may request your credit score/report are landlords, employers (both current and potential), insurance underwriters, and government licensing agencies. All of these people or companies want to know how financially responsible you are. From your credit report they can determine:
Negative credit information, such as late payments, can remain on your credit report for up to seven years. A bankruptcy can be listed for as long as ten years. The more negative items you have on your credit report, generally the lower your credit score. This credit score combined with your credit history are what creditors use to determine if you will be approved for new credit. They also use this information to calculate interest rates and overall loan terms and conditions. Someone with a low credit score can expect to pay a much higher interest rate for any type of loan and consequently will pay thousands of dollars more in interest charges over the life of the loan.
You should review your credit report at least once a year. It is your responsibility to make sure that the information is accurate and up-to-date. Every consumer is entitled to one free credit report per year from each of the three major credit bureaus. Also, if you are ever denied credit, that company has to send you an explanation in writing of why you were denied. This proof of denial letter allows you to receive a free copy of your credit report if you request it.
If you find inaccurate information in your credit report, you should contact the credit bureaus and inform them of the situation. You should have documentation available which substantiates your claim and which you can mail or fax to the appropriate department. Remember you have every right to dispute any information contained in your credit report.