These days, as more and more people have found themselves dealing with creditors on unfavorable terms and fighting to pay household bills with mounting credit card balances, consumers are inundated with calls to keep an eye on their credit report.
Receiving a credit report from each of the three reporting agencies once a year is free, and it’s also a key step in detecting fraud and preventing identity theft.
Today, UWSA discusses the credit report: how to obtain it, how to read it, and how it relates to the credit score.
Obtaining Your Free Credit Report
Though there may be similar outlets with catchy jingles advertised on television, the official website maintained by the three credit reporting companies to meet their legal obligation to provide one free credit report per company per year; other services offering “free” credit reports usually do so under the condition that the user agree to credit monitoring or another fee-based service.
Using AnnualCreditReport.com, you can easily obtain reports from Experian, TransUnion, and Equifax. The website requests personally identifying information, including your Social Security number, and asks you several questions about your major credit history and past addresses to prevent fraud. Once verified, you are able to select one, two, or all three companies to receive credit reports from. Though the details of presentation differ, these reports are all essentially the same in intent and use.
Contents of Your Credit Report
Some essential features of your credit report include …
Complete transaction history. Your credit report includes past and present credit, loan, and other financial accounts and their status. You should explore these accounts, ensure that each one was legitimately opened by you, and verify that all accounts closed in the past are designated as such. Also included is the average age of opened accounts; a higher average age indicates a longer and more stable credit history, and therefore, a lower risk.
Potentially negative items. Modern credit reports generally single out “potentially negative items” such as account defaults for your attention. The website interface permits you to open a dispute case for these items from within your credit report. “Zombie debt” and other fraudulent or abusive practices, both from identity thieves and from creditors, can be detected by examining these entries.
Total indebtedness. Many modern credit reports allow you to estimate the total amount of payments due to all of your outstanding accounts and the type of debt that each one represents. Having a high amount of credit use in relation to your total credit line or total income are major factors that might prevent you from getting loans on favorable terms, and may result in restriction of current credit lines as consumer credit stagnates.
While much of a credit report is simple and easy to understand for a non-expert, there are a large number of features and facts not mentioned here. You can only access your free credit report once per year, and once you log off from your session, you generally cannot return to it. Be sure to set aside no less than an hour to understand your report thoroughly.
What About Credit Scores?
Your credit score is a numerical representation of overall credit risk, derived from the contents of your credit report. It’s an easy shorthand to understanding the health of your credit history, and is used constantly to determine your level of credit risk. Unfortunately, credit reporting companies are not legally obligated to provide your credit score with your credit report, and have monetized this as an add-on feature. We’ll discuss the credit score specifically and describe what each score means in a future UWSA post.