If you have obtained a free copy of your credit report, you’ve accomplished the first step. Now you have the task of reading through all the information on the report and understanding what it means exactly.
If you can learn how to interpret the data correctly, you’ll know how to spot mistakes and errors in the reporting. As you spot mistakes in the report, highlight each one so you’ll know to dispute it later.
The first section of your credit report is the personal profile. It contains your name, current address, previous addresses, current employer, previous employers, aliases (AKA), and birth date. Check this information to see if it is accurate. Something as simple as a spelling error should be disputed.
Focus on the aliases in particular. They are the different names entered into the computer at various times when you’ve applied for loans or credit cards. Suppose you apply for a car loan, and the salesperson misspells your name when they pull your credit report.
Since the name they entered is linked to your social security number, it will be submitted to the three credit bureaus and placed as an alias on your credit report. If you don’t want that alias on your report, you must dispute it and request it to be removed.
Now do the same thing with your address information. If you see an address misspelled or an address you never lived before, request to have the address removed through a dispute. Go on to do the same thing with your employment information and date of birth.
All the information must be 100% accurate and valid. That way, your credit profile does not get confused with other similar credit profiles in the system. Believe it or not, these mix-ups happen quite frequently.
Each time you apply for a loan or credit card, a credit inquiry is listed on your credit report. If you have too many inquiries within a short timeframe, it indicates that your spending habits might be a bit extreme to future creditors. It also lowers your credit score and makes you a high-risk applicant.
If you apply for a loan and the application gets denied, the denial will be listed on your credit report. Don’t fall into the trap of applying for loans at different lending institutions because it will keep dragging down your credit score each time you get denied. Then you’ll have even less of a chance to get approved. Not only that, but employers might look down upon those credit inquiries when you go to apply for jobs.
Approximately 10% of your credit score gets affected each time you apply for new credit. Too many inquiries within a short time will decrease your credit score. That is why if you get denied credit one time, you should request a copy of your credit report to see if any errors are on it. Those errors could be what is causing you to get denied in the first place. Then you can dispute the errors and fix your credit report before applying for another loan.
The account summary section gives you an overview of all the information on your credit report. You’ll see information about the number of active accounts open, number of accounts closed, real estate accounts, credit card accounts, debt in collections, outstanding debt, and so on.
Study the information in the summary section carefully. Check the accuracy of the balances and the accounts that are listed as active and closed. Make sure you check the accuracy of your three credit reports from the three credit bureaus. Each credit bureau has its own separate credit report on you. Sometimes the information on one report will have some differences compared to the information on another report. If you see differences that should not be there, you need to dispute them.
The differences are not always minor. If one credit bureau has not received updated information for your credit report, it will have outdated or incomplete information. You must check everything for accuracy, such as the accounts open, accounts closed, balances, debts owed, number of inquiries, collection accounts, and so on.
Pay particular attention to the derogatory section involving delinquencies because any inaccurate information in this section could be what’s dragging down your credit score. Dispute all inaccurate information that you find to correct it.
Most credit reports create categories for different credit accounts in the account history section. You could have categories for revolving accounts, real estate accounts, public records, installment loans, and so on.
Every account listed in each section will indicate the creditor’s name, the date the account opened, account number, high balance, amount of the monthly payment, the balance owed, and past due amount. The account status of each account will show as an unpaid collection, open, or closed account.
It is quite common for inaccuracies to be present. Each inaccuracy will severely affect your credit score, so dispute them when they’re discovered. The Payment Status section is where it counts the most. You’ll see payment history from over the last 24 months. The payments on an account will be listed as Paid, Collection, 30 Days Late, 60 Days Late, 90 Days Late, or 120 Days Late.
Look at the items listed as late. Sometimes you might submit a payment to a creditor, but they never reported it to the credit bureaus. That will cause it to be listed as late because the bureaus haven’t gotten the updated information. It is your job to dispute the information and request the proper updates to be applied.
Public records include things like tax liens, judgments, and bankruptcies. It is better to have no public records because only derogatory things show up in public records. So, if you see anything listed in your public records section, pay close attention to it. Each public record item will indicate the record type, account number, court docket, date filed, and other crucial information like that.
Bankruptcy accounts stay on your credit report for ten years. Court judgments could stay on your credit report for over ten years. Tax liens could stay on your report for any number of years. For this reason, the public records section is the most severe section of your credit report. You must do everything possible to avoid getting items listed in this section. That means avoiding bankruptcies, lawsuits, and foreclosures.
As you can see from reading this chapter, it is beneficial to your financial health that you request a free credit report. Then you can make sure it is accurate with the latest information about your credit. Whenever you spot an inaccuracy, dispute it with the appropriate credit bureau to have it removed and replaced. Then you can ensure that you have the highest credit score possible.