Understanding Your Credit Report

Credit Reports can seem like a very confusing and foreign piece of information, which carries with it a rather mystic sense of power. While this might seem like the case at first, credit reports are actually relatively simple and can be an excellent tool not only for creditors, but also for prospective borrowers.

Credit Reports consist of a number of pieces of financial information about a borrower and are available from any of the three credit reporting agencies. Credit Reporting Agencies collect information about borrowers and store it, so that they can later resell it in the form of a credit report.

The three companies responsible for providing credit reports are EquiFax, Experian, and TransUnion. These companies typically sell copies of credit reports for $20, so if a lender ever charges you more than this, you should be very wary.

You are also entitled to receive three copies of your credit report every year, with one provided by each credit reporting agencies. It is a good idea to check all three regularly, because even though they are supposed to contain the same information, nothing is perfect and errors do often occur. However, you should not get all three at once and should instead space them out throughout the year.

If a problem or discrepancy is present on the credit report, it isn't the end of the world, but it should be fixed as soon as possible. This is because a low credit score can make it much harder to get a loan.

Typically, it is necessary to get together documentation showing the debt was paid and send it to both the credit reporting agency and the creditor. They will also need a letter explaining the problem, as well as the personal information of the borrower, such as name, social security number, address, and date of birth. Once the problem has been fixed, the credit reporting agency should report it to the other agencies and it should disappear from your credit report.

Not only should you take measures to fix possible errors on your credit report, but it is also a good idea to pay off as much debt as possible before applying for a loan or mortgage. This can mean speaking with collection agencies and credit card companies to help remove late fees and reduce rates, but this work will be worth it in the end, because a clean credit report is much more attractive to banks and lenders.

Regularly checking your own credit report is good advice for anyone, because it can provide an idea of who is checking your credit and help detect identity theft. However, for the home buyer, it is essential to have a clear credit report and to ensure that you do not get any surprises when the bank runs your credit.