Understanding Your Credit Report and Score

Your credit score is based on a formulation used by the credit reporting agencies that creates a general average of your credit history and assigns a number to show whether you have excellent, good, fair or poor credit. While, your credit score is an average of your credit history, it is often the first thing creditors look at when deciding whether or not to give you a loan or credit account. While, you are unable to change the credit score directly, you can change and better your overall credit and credit report which will directly reflect on your credit score.

When looking for a way to improve your credit score there are many steps in the process and it will take a little bit of time for the improvements you make to reflect on your credit score. You can go through the process alone, or you can enlist the help of a credit counselor which can help with the process, paperwork and the law on what you are allowed to change and dispute and what you are not.

1-    Request all of your current credit reports 

Your credit report is available from each of the three major credit reporting agencies, including Experian, Equifax and TransUnion. All of these agencies have a web site where you are able to order your credit report that can be delivered in paper form or instantly electronically. Once you have your credit reports, print them out. This will take lots of paper, but it worth it to have them spread out in front of you for the best results when looking over them. 

2-    Know your credit

You may not know your current credit or have kept up with what is on your credit report until now. This is a big mistake. You should purchase, or get a free credit report, once a year to check for mistakes or fraud. If you never have, you will need to pay extra close attention to the items on your credit report.

3-    Go through your credit report with a highlighter

Go through every part of your credit reports including the personal information, highlight anything that is incorrect. This should include wrong addresses, misspelled name(s), any accounts and other items you don’t recognize. Also, mark items that are yours but that you may want to dispute the balance, interest rate or other parts of the account.

4-    Follow the directions for disputing inaccurate information

At the end of the printed and electronic credit reports are the instructions on how to dispute items on your credit report that you feel are inaccurate. You can complete this process in writing or online. When doing so you will need to provide ample proof of the item you are disputing, whether that’s receipts for an item you paid or proof of your identity to dispute an identity or past address problem. You should also always make copies of everything you send to the credit reporting agency.

Regardless, of the information you find on your credit report, it’s important to understand how credit works and how you can improve and dispute the information on your credit report. The most important thing to take away from this is the need to get all three of your credit reports every single year to check for inaccurate information. This is not only smart financial practice, but one of the best ways to protect yourself from identity fraud.