August 22, 2019

Reading Your Credit Report and Understanding Your Credit Score

One of the basic steps in repairing your credit and taking charge of your financial life is accessing and understanding your credit report and credit score.

Not only can poor credit weaken your chances for getting a loan from a bank or lender, but it can also impact your employment and approval for various service providers—think utility company, landlords and rental properties, and more.

Reading Your Credit Report

Thanks to the Fair Credit Reporting Act, enacted in 2001, you are eligible to request a free credit report once each year from all three national credit reporting agencies: Equifax, Experian, and TransUnion.*

Your credit reports contain a summary of your credit accounts, detailed account histories and important personal information. Review them carefully and note any discrepancies you find in the following information:

  • Personal identifying information, including birth date, address, social security number
  • Credit and loan accounts, which will include both open and closed accounts
  • Account histories for each credit line and loan, including the original loan amount, the date it was opened, date it was closed if applicable, the current balance owed, minimum monthly payment required, notice if the account is delinquent or past due, and a payment history.
  • Collections summarizes any account that might be in arrears and turned over to a collection agency.
  • Public record, which could include information such as a bankruptcy filing or arrest record.

What happens if you find incorrect information? According to the Fair Credit Reporting Act, you have a right to request that both the credit bureau and the lender that provided the inaccurate data correct the information. Send corrections in writing to both and make sure to include any documentation you can – statements, cancelled checks, payment confirmation numbers, etc.

Your Credit Score

Don’t confuse your credit score with your credit report. Your score is calculated using a financial algorithm and the data culled from your credit report. Banks and lenders use credit scores to measure your debt risk and to determine how much they will charge you to borrow money—think interest rates and additional fees for example.

Since your credit score is calculated using the data in your credit report, you might see why reading your report and reporting any errors could deeply impact you financially.

So what’s a good credit score and what’s a bad score?

Most financial experts suggest that 700 and above is a good credit score, while anything below 600 is poor, at best. If you’re not in the above 700 realm you can improve your score by making prompt payments on your accounts and curbing any irresponsible spending and financial habits that could be contributing to a poor credit history.

*To request free credit reports visit www.annualcreditreport.com. This is the only FTC authorized site. Beware other sites that promise “free” reports then charge you fees.

For more information, visit http://www.idcredit.org/

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