Credit reports are tools that different institutions use to assess how you have handled your previous credit obligations and determine your creditworthiness. 

The three main players in the credit reporting business are Transunion, Experian and Atlanta’s own Equifax.  It is important and your responsibility for you to obtain and review your credit reports for accuracy.  Not only are credit reports used by potential lenders, but also by service providers (like cell phone and insurance companies), authorized parties (utility companies) and potential employers.

Your Credit Report

Your credit report contains your personal information, account history, collection accounts, public records, credit inquiries and a consumer statement.  Your personal information includes your name and aliases, date of birth, places of employment and address histories.  Your account history details the accounts that you have both opened and closed in your credit life.  It may show the dates that accounts were open and closed, account status, limits and balances, minimum payment due each month and payment history.  Collection accounts represent accounts that have been turned over to outside collection agencies.  They signify debt that you failed to pay back and are considered a negative factor for future creditworthiness.  Public record information may include tax liens, bankruptcies, foreclosures, civil suits and court judgments including garnishments.  Credit inquiries provide a list of every institution that has pulled your credit report over the last two years.  Inquiries may have been made by anyone whom you may have applied for credit, utility companies, property management or leasing companies and potential employers.  A consumer statement is your contact with the credit bureaus, in which you explained the circumstances surrounding your credit history.

Use these action steps to identify and correct any misinformation:

• You have the right to review your credit report for free up to three times per year.  Contact Equifax, Experian and/or Transunion to get your report directly.
• It is important for you to review these reports to make sure there have not been any instances of mistaken identity,
• Close accounts that are dormant and you do not intend to use,
• Check your employment history for accuracy.  Potential employers may be able to cross-reference your employment history with your resume for accuracy,
• Use your ability to use the consumer statement to clarify and explain anything that may be detrimental to your credit report.  Potential lenders and employers may take this explanation into account before moving forward.
• Contact your personal lending representative and consult them on your findings.  I’ve had good experiences with the folks at Chase, Westside and RBC banks.  Schedule a one-on-one meeting with one of their representatives if you are looking to create a relationship.

Your Credit Score

Your credit score is actually different from your credit report, even though tricky marketing has associated them as one in the same.  Your credit score is a proprietary number that is based on a formula based on your credit history, overall debt amounts and limits, and your length of credit history.  Payment history is the single most important element of the overall scoring system.  If you have had delinquencies or “charged-off” accounts, your score will undoubtedly suffer.  The amount of overall debt is another really important factor in the calculation of your credit score.  The credit score is also affected by the amount of debt incurred as a ratio of your total debt limits.   Your length of credit history also is important.  Lenders like to see a long, proven history of paying your debts off.  People who have no or short histories will likely have lower scores.

When researching your credit score, keep these thoughts in mind:

• Anyone can miss or be late for a payment due to the “busyness” of life.  Review your monthly statements and if you find a late or missed payment, call your lender immediately.  You may be able to have them forgive your mistake and not allow them to report this single action to the credit bureaus.
• Build a positive credit history.  Show potential lenders that you are a responsible borrower.
• If you are having trouble with debt or rebuilding your credit, look into attending Dave Ramsey’s “Financial Peace University.”  As a graduate and facilitator, I highly recommend these programs.  Westside Baptist has classes, or to find a class closer, or at a different denomination, go to daveramsey.com/fpu

Research Intelligently

Now, lenders will be required to disclose the source of their lending decisions under the Dodd-Frank Act.  When accessing your credit report you will be offered to learn your credit score.  These subscriptions are not free and may cost between $2 to $15 per month.  You don’t necessarily need to review your score, really the credit report contains the important information.  Set up a system to review your credit reports regularly, whether it’s on important dates, or the first of January, May and September.

 Derek Nowatzki is a 23-year Mableton resident who has been serving the insurance, financial and tax needs of individuals in the Mableton area for over 10 years.  He can be reached at Derek@amsservices.biz