Studying Your Credit Report

Ready for the scoop on your credit report? Studying your report isn't hard, and could pay big dividends if you're in the market for a loan. If you understand your credit report and have a good credit score, you can negotiate with lenders for the very best interest rates.

Your credit report is simply a file on you. It contains information about where you work and live and how you pay your bills. It also may show whether you've been sued, arrested or ever filed for bankruptcy. Companies called consumer reporting agencies or "credit bureaus" compile and sell your credit report to businesses. Because businesses use this information to evaluate your applications for credit, insurance, employment, and other purposes, it's critical that your credit report be complete and accurate.

That isn't always the case. Financial advisors suggest that you periodically review your credit report for inaccuracies or omissions, which are frighteningly common. It's especially important if you're considering making a major purchase, like buying a home or car. Checking in advance on the accuracy of your credit file is good financial diligence. It might also make the difference in getting your loan. By law, the credit bureaus must let you see your report once a year.

Credit Warning Signs

Keeping your finances running smoothly is simple when you know about possible detours that lie ahead. The danger signs here are the top reasons for credit report troubles. Spot them early and you'll avoid any potholes in your financial journey.

Unusual Data – Not sure where that credit card came from? Unauthorized account or address changes could be a sign that a thief is using your identity. If you find a credit card or loan that you don’t remember opening, call the creditor immediately. If it turns out to be a case of identity theft, shut the account and follow the fraud resolution procedures outlined in our Credit Learning Center.

Maxed-Out Credit Cards – High balances on credit cards are common after the holidays, but that extra debt could be bringing your credit score down significantly. Reducing your balances to below 35% of your credit limits helps improve your creditworthiness and can save you a bundle on interest.

Late Payments – Paying debts late not only costs you a fee but also damages your credit. If you have had trouble making your payments on time, evaluate what is causing the problem. Ask your creditor to move your due date to a different time of the month or sign up for online bill payment service that can be programmed to remind you before the due date.

Mistaken Identity – With nearly 300 million people in the U.S., a few crossed credit records can be expected. Finding someone else’s data on your credit report is more likely for people with popular or shared family names like “Jane Smith”. If you find something that does not belong on your report, contact the credit reporting agencies to have your data corrected.

Credit Score Differences – A dramatic difference in one of your three credit scores can point to a potential error on that report. For instance, if your score based on Equifax data is 50 points lower than your TransUnion and Experian scores, it is a good idea to look closely at your Equifax report for inaccuracies or signs of identity theft.