Understanding Your Credit Report
Upon first viewing your credit reports there is a sudden feeling of confusion. There is so much information, some of it you've never seen before. There is all sorts of coding and words you don't understand. It can become very upsetting. But don't fear! We are here to help you make sense of the chaos that is a credit report.
There are three credit reporting bureaus. They are: Equifax, Experian, and TransUnion. Despite what you may believe, these companies are not government owned and operated. They are all independent of each other and are out to make a profit. How do they profit? Well, there are many ways.
One way they profit is by selling your credit score and information to creditors. These creditors pay to see your information in an effort to decide if you are credit worthy. When your credit is pulled at your request when applying for credit this is called an inquiry. All your inquires are listed at the end of your credit report. This particular type of inquiry is often called a hard inquiry. Every 3-5 inquiries can hurt your score 10-35 points.
Creditors will also buy only credit scores and information from credit bureaus. For instance: Citibank may pay Experian for the name and address of everyone in the Phoenix area with a credit score of 550-625. They often ask for lower credit scores because they are able to charge more interest and make more money. When credit bureaus sale your information like this it will show as an inquiry on your credit repot. This is called a soft inquiry. Bureaus claim that these do not hurt your score. But we've found this to not be true. All of our clients are put through a system so that the bureaus are unable to sell their information keeping their score from taking a hit.
Most credit reports also list your name, address, phone number, and occupation on the first page (Experian puts it at the end). It is important that they have all your current information correct. If you move you need to do a change of address with the post office immediately and contact our office.
Experian and TransUnion list your negative accounts before your positive accounts. Equifax mixes them all in. Each report is coded differently. Read the coding information located at the beginning of each report before reading on. Experian is not coded. It lists all information word for word.
Each line of credit contains the same information: creditor, account number, date opened, date closed, credit limit, bal-ance, recent payment, date to be removed from report, and typically a creditor's statement.
Sometimes you may not recognize the name of a credit grantor listed. This is typically because it is an account that has been sold to another company. If the account is listed as negative and you believe it may be identity theft contact our office immediately.
It is important to know the date that an account was closed. Bankruptcies will stay on your credit for seven to ten years from date filed. Slow pays, collections, and repossessions will stay on your report for seven years. Often you will find an account on your credit that is older than this. It is very important that these items are removed. Collection accounts are tricky. They will stay on your credit for seven years from date of file. But, if five years later you pay this account in full the account will be reopened and will be on your credit for another seven years from the date of payment.
You also need to be sure to check your credit limits and balances. On credit card accounts it is best to have you balance below 50% of the limit. Paying your cards down to this amount will give your score a sudden boost. It is better to have three cards with balances below 50% than to have two cards with no balance and one card maxed out. Also, if you pay off a credit card that was once maxed out and has no slow pays, do not close the account. Much of your credit score is based on length of established credit. By closing the account you will often see a lowered score.
The recent payments are can be confusing. This section will list all of your slow payments with an emphasis on the last 24 months. They look at this period of time because it has the most influence over your score. Experian will list the date and how long an item was late very simply on the right. TransUnion list out the last twelve months in boxes and will put the amount of days late in each corresponding box. Equifax will list the dates with numbers coded to represent the amount of days late (1 is 30 days late, 2 is 60 days late, 3 is 90 days late). Equifax will also use this section to mark when an account was charged off or repossessed by using the appropriate coding.
Each line will also give the current status of the account. It will list if it is open and paid as agreed, closed, collection account, or repossessed. There is sometimes also a com-mented listed by credit grantor stating that the account was closed by them or by you.
It is very important that all the information is correct for each line of credit. If you believe you may have incorrect information on your credit please give Roberts Credit Group a call. We can help you make sense of your report and correct information.
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