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Thanks
to a new federal law put into place in September
of 2005, everyone is entitled to one free
credit report
each year. This is so that you can verify that
your report does not contain any false
information, and so you can see how your credit
rates. Getting your annual free report is as easy
as going to the authorized source,
www.annualcreditreport.com and requesting one.
Once you have your free report, what in the world
do all those abbreviations, numbers and codes
mean?! The most widely used system for scoring is
the FICO score, developed by The Fair Isaac
Corporation, and the number determines the risk to
extend credit to an individual. Credit reports
are usually divided into sections; identifying
information, public records,
credit history,
and inquiries to your credit report from creditors
looking to extend you credit based on your
credit score.
The identifying information includes your name,
address, and social security number. Make sure
they are all correct. Usually this section will
also include a list of your previous addresses,
your date of birth, phone number, spouse's name,
employers information.
The public records section is the section you hope
has no information. This is where a bankruptcy or
judgment would show up on your report, and it will
harm your rating more than anything else on the
report, and take longer to repair.
The credit history section is the most confusing.
It will list every creditor you've ever had
business with, including accounts that have been
closed and those that remain open with no
balances, and accounts that you are currently
making payments on. Depending on which credit
reporting agency you get your report from, this
section will actually be displayed differently on
each report.
Experian's
report displays it in ”english”, and states
everything in common sense terms, like ”pays on
time”, ”pays 30 days late”, etc. Reports from
other agencies might use numerical codes in a
table that you have to refer to another page to
find out what each code means. Either way, make
sure you agree with each creditors reporting of
you since this is how your score is determined.
If you have accounts that you don't have the
credit cards
for anymore, or a loan that has been paid off but
remains on your report as a revolving credit
(money available to you as you pay it down), call
and write each company to ask them to close the
account completely and report that to the credit
agencies. Otherwise, it appears that you have all
of that money available to you, and that goes
against your debt to income ratio.
The section called ”inquiries”, and it includes a
list of everyone who has ever looked at your
report. This will include credit companies you've
contacted to request a
credit card
or loan, but it will also include what is
considered ”soft” inquiries. Soft inquiries are
any promotional offers, such as a retail store
checking into your credit history to determine
whether or not to mail you an offer for their
credit card. Soft inquiries do not harm your
overall credit score.
You can also get a copy of a credit report any
time you've been denied credit. This is because
there is always the possibility that there are
errors in your report, which prevented you from
obtaining the credit you applied for. Regardless
of how you get your report, take the time to look
it over and find any discrepancies (immediately
call the creditors in question and straighten it
out) and close out any accounts that you no longer
use but are showing open and available to you on
your credit report. Having your report will show
you where you stand if you're considering going
for a mortgage, new vehicle, or other loan.
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