What You Should Know About Your Credit Report

by Ron Haynes

Credit Cards

No matter if we like it or not, we are a nation of credit. We probably won’t be able to change that anytime soon, so how can we insure that we are positioned so credit doesn’t come back to haunt us? Education. We need to understand our credit report and how credit scoring works. Here’s a 10 question quiz of something I received from Equifax.

These are all True or False.

1. Equifax, Transunion, or Experian (the big three credit reporting agencies) determine if you get a loan and at what rate.

2. Your payment history is the single biggest factor in determining your credit score.

3. When you get married, your spouse’s credit records are merged with your own.

4. Closing old or unused credit accounts always helps your credit score.

5. Your credit report can influence whether or not you get a job or rent an apartment.

6. Checking your own credit has a negative impact on your credit score.

7. There are many different ways to score your credit report.

8. Your current income and your bank statements are part of your credit report.

9. Credit repair experts can get negative entries removed from your credit report quickly and easily.

10. You cannot remove any inaccurate or fraudulent information from your credit report.

So, how do you think you did? Credit is a one of those subjects people think is a big mystery. It really isn’t. True mysteries are things such as what gets you ranked highly by Digg or Google. Credit is nowhere near that mysterious if you remember three basic rules:

  1. Always pay at least the minimum. Pay more if you can, but the minimum at a minimum.
  2. Always pay on or before the due date. Don’t every be late. Ever.
  3. Don’t apply too often. Applying too often makes you look desperate. No one likes desperate.

Those rules will help improve your credit more than anything else, though I do have some methods that I used to help clean my report about 10 years back. I’ll share those later.

Here are the answers:

1. Equifax, Transunion, or Experian all determine if you get a loan and at what rate.

FALSE. Lenders make the decision to grant you a loan and they alone determine the rate. The three credit reporting agencies are just that, reporting agencies. They only provide information to lenders about your credit history and payment records.

2. Your payment history is the single biggest factor in determining your credit score.

TRUE. Making timely payments improves your credit score more than any other single factor. There are other factors, such as length of time you’ve had credit, the amount of credit you have in relation to your income, and the amount of credit you’ve used in the past, but these don’t have the punch that timely payments have.

3. When you get married, your spouse’s credit records are merged with your own.

FALSE. Credit reports are on individuals, not on couples. If you have joint accounts, both credit reports will be affected. If you jointly file for bankruptcy or have joint court judgments, these will be on your report. Anything that has both names on it has the potential to be on both credit reports.

4. Closing old or unused credit accounts always helps your credit score.

FALSE. Closing an account can hurt your available credit to current debt ratio. Your score can also be hurt if you close old accounts because length of credit history is one factor in your credit score. By the same token, don’t rush out to open a new credit account to help your available credit to current debt ratio. That can backfire by having to many inquiries on your credit report.

5. Your credit report can influence whether or not you get a job or rent an apartment.

TRUE. Scary isn’t it? Employers, lenders, and landlords all are requesting permission from you to check your credit. If you say no, they simply will not offer you the job, loan you the money, or rent you the apartment. It is your right to refuse to give them that information, but it is also their right to refuse to hire, lend, rent to you.

6. Checking your own credit has a negative impact on your credit score.

FALSE. When you check your own credit, it’s called a “soft pull” and doesn’t show up as an inquiry. Too many inquiries are bad because they imply that you are searching for a loan and no one is giving it to you. It makes other lenders suspicious. Does someone else know something we don’t?

7. There are many different ways to score your credit report.

TRUE. A car company may give greater weight to your automobile payment history, while a credit card issuer may look at the bigger picture. A mortgage lender may give greater weight to your house payment history.

8. Your current income and your bank statements are part of your credit report.

FALSE. You credit report will usually include the date you opened the account, the credit limit or amount you borrowed, the payment terms, the balance, your payment history, inquiries from others, any judgments, bankruptcies, liens, or collection agency debt you owe. Your income isn’t on there.

9. Credit repair experts can get negative entries removed from your credit report quickly and easily.

FALSE. Don’t believe them and don’t fall for their slick marketing. Cleaning up your credit takes time. It takes payments. It takes patience. And it takes a commitment from you to never let yourself get into this bad condition EVER again.

10. You cannot remove any inaccurate or fraudulent information from your credit report.

FALSE. Anything that is inaccurate or fraudulent is subject to removal if you can prove it. That’s the key. Keeping accurate records will help you in the long run. It helped me clean up MY credit report. Here’s how:

After I went through Consumer Credit Counseling Services in 1997, I found that there were some dates that were off on my credit report. I saw where several lenders had reported erroneous information such as I was late on a certain debt 8 times. My records showed that I was late 6 times, but nonetheless, the records at the credit bureau were inaccurate in the technical sense. I wrote a letter to all three agencies claiming that my records didn’t match their records and that their inaccurate information was “highly injurious” to me. I demanded that the information be corrected in a certified letter and that I get a new, updated copy of my credit report. Several weeks later, each agency informed me that their information was being investigated. To my surprise, 3 out of the six lenders didn’t respond to the agencies request for verification and 3 negative entries were removed.

When a lender doesn’t respond to the credit reporting agency within a certain time, the credit bureau is required to strike that entry and that is what happened to me. The credit agencies said that the other three were reported as accurate. I resubmitted, saying again that the records were inaccurate and that I wanted a second verification. A few days later, I thought that the second round of letters didn’t get sent so I sent them all again (I kept copies). I discovered later that those second copies were sent so I had re-re-submitted. What happened next blew my mind. Two out of three didn’t respond.

Over a six month period I had contested enough that 5 out of 6 lenders had withdrawn negative entries on my credit report. The only one who didn’t was Sears/Discovercard. I don’t know if this will still work today. I’ve had my report cleaned up by contesting inaccuracies and by making timely payments for over 9-1/2 years.

If you have entries on your credit report that don’t exactly match your records, contest them. I would not suggest doing it by email. I would use snail mail and always send everything certified, return receipt requested. Credit reporting agencies want to have accurate information. Help them keep yours accurate by contesting anything that isn’t correct. Anything.

Keep us informed of how it goes.

Here is a link to get your once per year FREE credit report.
Generation X Finance wrote a great article on 15 Ways to Establish and Improve Your Credit History and Fico Score. It is worth reading.
[tags]life, blog, weblog, credit, credit report, Equifax, Transunion, Experian, quiz, personal[/tags]

About the author

Ron Haynes has written 1000 articles on The Wisdom Journal.


The founder and editor of The Wisdom Journal in 2007, Ron has worked in banking, distribution, retail, and upper management for companies ranging in size from small startups to multi-billion dollar corporations. He graduated Suma Cum Laude from a top MBA program and currently is a Human Resources and Management consultant, helping companies know how employees will behave in varying situations and what motivates them to action, assisting firms in identifying top talent, and coaching managers and employees on how to better communicate and make the workplace MUCH more enjoyable. If you'd like help in these areas, contact Ron using the contact form at the top of this page or at 870-761-7881.


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{ 7 comments }

angie

i got 7 right. didn’t know about the merged credit or diffrent ways to score it or that you could erase the wrong stuff on it. thanks for posting this about what you did. i may try that. i want to by a house in a few years and want my credit report to help me get a better rate.

Jeff@My Super-Charged Life

I agree that you have to be proactive in managing your credit history. I have pulled a credit report on myself before and found things that surprised me. Based on my experience, I think these are excellent tips that everyone should heed. I am personally going to avoid using credit in the future, but I still don’t want inaccuracies on my credit history. These reports are used in all kinds of ways that most people may not even know about.

Mike

Ron: This makes a great document to keep. So we can all keep our reports in better shape.

As a bit of an aside, I’ve been the victim of credit fraud twice. That always makes for some “fun” work on your credit report! On my first round, I was advised to put a security flag on my accounts at the Big 3 reporting agencies, requiring that I be notified before anyone could get credit under my name. That was easy, just a phone call to each. Then, I moved and got rejected for utilities. It turned out that the utility companies wouldn’t go to the trouble to get around the security flags, so they just rejected me instead. Although turning on the security flags was easy, it took me weeks to get them turned off, so that I could actually get little things like electricity.

That’s just one “fun” side of credit fraud!

Ron

@Mike
Thanks.
Twice? I was a victim once and that was enough. I did the same things as you but I also signed up for credit monitoring throught Equifax. I did buy a car some time after that and it was a hassle.

Did you prosecute?

Ron

@Angie
Just make sure you pull your credit report and insist that any inaccurate entries are removed. Thanks for commenting.

@Jeff
Every time I pull mine (8-12 times/year) it seems like there’s something on there that makes me say, “Hold on a minute, what’s THAT?”

Love your new site Jeff. It looks GREAT!

Mike

Yep, twice, Ron. The first time grew out of being robbed, I think. Police never caught the robbers, but a few months later I got a call from a Sheriff hundreds of miles away who’d arrested someone who had a driver’s licence, checking account, and credit card in my name. He’d been arrested on another charge, they couldn’t link him back to robbing my house, and the sheriff said that he couldn’t do anything about the credit/identity fraud. He said that he was just calling me as a “courtesy”–then he added that I’d have to do all of the work in tracking just what this guy did. As it turned out, he hadn’t done much. Amazingly, he’d only gotten the checking account and credit card the day before, and he hadn’t used any of the $10,000 credit line on it. At least in the state I was in then, that left nothing to prosecute.

On my second round, I suspect that someone double-swiped my credit card on a business trip in Toronto. Shortly after I returned, my credit card company called me about buying $12,000 worth of computer equipment and software … in Spain! It was pretty easy to prove that I had not been in Spain. Even easier, it was my CitiBank card, and they handled the whole thing.

Ron

@Mike
Wow. Twice is too much. I bet that was a serious drain on you. I hate to hear that you had to go through that. I bet you’ve learned a great deal through it though. We all need to be more vigilant with two things: our time and our reputation. Identity theft hurts both of those.

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