annual credit report

annual credit report

The Importance of Annual Credit Reports

1. The Basics of Annual Credit Reports

A credit report is basically a report card of one’s credit history prepared by a credit bureau. Credit history information usually comes from parties such as financial institutions, court records, and other credit companies. Credit cards are a major aid in today’s living as it helps individuals to buy items over a period of time instead of using cash now. The terms agreed on the buying of the item using the credit card would be to pay off the debt in full at the end of the month or to make minimum payments based on a percentage of the total debt. These terms usually incur interest and fees if the full amount is not paid. When credit is not paid in full or if payments are late, the credit card company has the option to raise the amount of the debt by increasing interest on the item. Credit reports are used to check an individual’s history to see if they are eligible for a loan or a line of credit. With a bad credit history, one may not be approved from the lender or if they get the loan it will be at a high interest rate. An individual can obtain their credit report by contacting a credit bureau. They must verify that they are who they really say they are to ensure security of the report. A credit report can often be obtained for free if an individual has been denied credit recently or if they have been denied employment based on the report. A free report can also be obtained if an individual certifies in writing that they are unemployed and plan to look for a job within 60 days or if they are on welfare. An individual also has the option of purchasing a report.

2. Understanding Your Credit Score

Understanding your credit score comes down to recognizing the behaviors that can negatively affect your credit score. Credit scores range from 300 to 900 points. Your credit score has an effect on your ability to acquire credit products at the best rate. It is a good idea to check your credit reports from both credit agencies annually to ensure the records are up to date and to take corrective action should you discover any inaccuracies. When you apply for credit, a potential lender will pull your credit report from a credit agency to inspect your credit history. Your credit score is a way to quickly evaluate your creditworthiness. A low credit score could mean that you will be denied credit. Any credit reference can affect your credit score. A public record of a judgment, a tax lien, or a bankruptcy can drastically reduce a credit score. It is important to be aware of the security of your credit score and credit report as identity theft is always a threat. An identity thief who has your personal information may apply for credit in your name and pull your credit report. This is why monitoring your credit report can help prevent and deter such activity.

3. Detecting and Resolving Errors on Your Report

It can be very annoying if something is on your credit report that is wrong, and it is even worse when you do not even know about it. Mistakes can be made, and it is not unheard of for there to be errors on a credit report. That is why it is so important to check credit reports annually. By doing this, the consumer can ensure that all of the information on it is correct. If something is on the report that is inaccurate, or if there is something that does not belong to the consumer, it can be a sign of trouble. This could mean that the consumer has been a victim of identity theft, or it could mean that there has been some sort of error with someone else that has the same name, or social security number. This could lead to someone else’s information being placed on report. This can have very damaging effects to one’s credit, as well as the victim having difficulty in fixing the errors, and may suffer from the problem occurring repeatedly. If the consumer does come across an error when examining the credit report, it is vital that it is corrected as soon as possible, and task not easily done. The first thing to do is to contact the credit bureau in writing, making sure to send copies of any evidence that there is to support the claim of the error. This could be a receipt of payment, or any documentation showing that what is being reported is indeed false. The credit bureau then has 30 days to conduct an investigation. They will contact the company who has reported the information, and will try to have the matter resolved. If no contact is made between the consumer and the credit bureau within the 30-day period, the consumer is obligated to take the action that was to be taken, and the credit report and any documentation will be changed.

4. Protecting Your Credit from Fraud and Identity Theft

The Federal Trade Commission conducted a study that shows 5% of consumers had errors on their credit reports that could result in less favorable terms for loans. That’s equivalent to 10 million consumers! With it being so easy to become a victim of credit fraud or identity theft and with such a large percentage of credit reports containing errors, it has never been more important to monitor your report. Steps to take to protect yourself from credit fraud would be to delete all info stored on any automatic form fill feature and to clear your browser memory after accessing any bank or credit accounts online. This will help to prevent thieves from accessing your personal information. Another preventive step would be to place a fraud alert on your credit report. This will alert creditors to further verify your identity before extending credit. This may cause slight delays if you are in the process of obtaining credit, but it is a small price to pay for extra security. If you are a victim of identity theft, the FTC provides a site which provides a streamlined process complete with a handy checklist to help victims reclaim their identity.

Reviewing your credit report for accuracy is an important step in protecting your credit from fraud and identity theft. Since your credit report is updated constantly, new accounts can be added, old ones closed, or delinquent information can be reported. You are the only person who will notice inconsistencies in your report. Because of this, you must get into the habit of reviewing your report annually. One way to remember to do this is to pull your credit report every year on your birthday. With your credit report readily available on the internet, accessing your credit report is easier than ever. By keeping an eye on your credit report, you can catch inaccuracies before they severely damage your credit.

5. Taking Action to Improve Your Credit Health

Pay your bills on time. Using credit has become an American way of life and it is not necessarily a bad thing if you stick to the golden rule of smart credit use: Live within your means and always pay your bills on time. Credit only becomes a problem when lives are driven by the ability to spend with credit, rather than the means of income. It can also become a problem when extenuating circumstances like illness or job loss make it difficult to pay bills and debts accumulate. Always paying your bills on time is the best way to ensure your credit remains healthy. The method is simple, but making it reality may mean switching your billing due dates so they are all at the same time of the month or automated bill pay. If you struggle to pay bills on time because you are working too much just to cover basic living expenses, this may be the best time for credit counseling.

You may find that negative items on your credit report severely limit your financial choices and increase the cost of credit by making it difficult to qualify for credit cards or loans. There is no way to remove accurate negative information from your credit report, thus the only cure for bad credit is time and a conscious effort to develop and stick to a personalized game plan. This plan should include specific steps to improve your credit health. This in turn will save you money by lowering the cost of credit in future years. With a little focus and follow-through, the following steps will help you improve your credit health.