Understanding Your Credit Reports

You credit can have a major impact on so many aspects of your life, and it is important that you know what is on your credit report and how to manage it. Understanding your credit can appear complicated and challenging; however, it can also be a powerful tool. In this three piece series we will go over understanding your credit report, understanding your credit score, and establishing your credit.

Our credit plays a big part of our daily lives. Sometimes we do not realize this until someone starts asking us about it. Our credit determines our cost of lending. Essentially, credit effects interest rates, the price and ability to obtain insurance, housing opportunities, and our ability to obtain certain jobs. While credit can and should be used to improve our financial well being, many people struggle with excessive debt obligations because of the mismanagement of their credit. Using credit wisely is the key to assisting you to a world of possibilities.

You should be checking your credit at least once a year from each of the three major credit reporting agencies: Equifax®, TransUnion® and Experian™. You should also check your credit report anytime you think that your information may have been compromised.  Each of your three different credit reports most likely will have slight deviations, but on the whole each should be relatively similar as most major lenders report to all three agencies while some of the smaller agencies and collection companies may only report to one of the three.

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To get started, you will need to pull your credit report from each of the three credit bureau reporting agencies listed above. You can access all three agencies at one time through sites such as www.annualcreditreport.com, which provide a free credit report from each of the three major credit reporting agencies. You can also get your credit report through many credit card providers, which provide monthly credit report tracking tools for free as long as you have an account with them. These programs vary by company and usually only provide access to one of the major credit reporting agencies, but they are useful tools for tracking and learning about your credit.

Once you have access to your credit reports it’s important to understand the information on them. Your credit report is typically divided into categories consisting of your Identifying information, credit inquiries, public records, and account information.

Identifying Information

                The identifying information on your credit reports is essentially all your personal information, including:

  • Name, known aliases, and previous names (these may include maiden names, other married names or nicknames; for example, if your legal name is Stephen but you go by Steve, then Steve will also be listed)
  • Social security number
  • Date of birth
  • Current and former addresses
  • Current and former phone numbers

The purpose of the identifying information section of your credit reports is to verify the information you have provided and to look for any warning signs or red flags regarding incorrect information. The information should be reviewed carefully to ensure that your identity has not been confused with someone with a similar name or a relative with the same name. You may be able to tell whether you have been a victim of identity theft.  Should you find a discrepancy in any of the information on your credit report you can file a dispute or an update to change it.

Inquiries

                In the inquiries section of your credit report you will find a listing of creditors and other companies that have requested your credit report over the past two years. There are two types of credit inquiries, soft and hard inquiries.

  • Soft inquiries are a result of companies purchasing or obtaining your information for promotional purposes or a current creditor checking your account on a regular basis.
  • Hard Inquiries are made when you have applied for credit through a financial institution. Close attention should be paid to any unauthorized hard inquiry as it could be a sign of identity theft. These inquiries can also negatively affect your credit score.

Public Records

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                The public record section of your credit reports will display financial activity such as foreclosures, bankruptcy, tax liens, and civil judgments against you. Ideally, you want this section to be blank as anything displayed in this section can penalize your overall credit score.

Account Information

                Your account information is where you will find the specific details of your account history. This will likely be the most significant portion of your credit profile. It is here that you will find the specific details of your credit history from current and past creditors. Each creditor will have their own section containing information regarding:

  • Payment history
  • Credit limit
  • Dates accounts were opened and closed
  • Most recent payment amount
  • Current balance

If the account has not been managed properly the account will reflect this in the history, including current or previous late payments, and cases where accounts have been closed by the grantor or even transferred to collection.

Understanding how to read your credit report is a start, but you need to know your rights and resources, as well.  The Federal Trade Commission, which protects consumers by preventing unfair, deceptive or fraudulent practices in the marketplace, enforces the Fair Credit Reporting Act and Accurate Credit Transactions Act, with which the credit reporting agencies must comply. Accordingly, you have the rights to:

  • Be told if information on your credit report has been used against you, such as being declined for credit or employment due to information obtained from your credit report.
  • Know what is on your report and having free access to your credit report annually. You also have the right to view your credit reports should you believe that you are a victim of identity theft or fraud, and if you are on public assistance or unemployment.
  • Request to see your credit score, though you will have to pay for it.
  • Dispute incomplete or inaccurate information, though the credit reporting agency must investigate should your dispute be frivolous.
  • Have inaccurate, incomplete or unverifiable information corrected or deleted by the credit reporting agency within 30 days of being notified, though they can and will continue to report should they confirm that it is accurate.
  • Remove most negative information from your report after seven years and remove bankruptcies that occurred more than 10 years ago.
  • Limit access to your report to those with a legitimate business interest .
  • Privacy regarding credit reports, wherein a credit reporting agency may not provide information to employers without written consent.
  • Opt out of “pre-screened” offers of credit and insurance by calling the nationwide credit bureaus at 1-888-5-OPTOUT (1-888-567-8688).
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Another great resource for understanding you rights is the Consumer Financial Protection Bureau. They regulate the offerings and provisions of consumer financial products and services under the federal consumer financial laws. This is a great site to visit for additional information that will help you to become a better informed consumer of financial products and services, such as lending and how it relates to your credit.

Your credit reports are a record of your borrowing history and how you have managed your financial obligations. Knowing how to read your credit reports is an important step in helping yourself understand how to better utilize your credit to help you succeed financially and ensure that you are protecting yourself from identity theft and fraud.

Tell me your stories and your thoughts by leaving a comment below. Let’s have a better money conversation.

Protect Yourself From Financial Fraud: Five Ways to Start Protecting Yourself Today

Protecting yourself from financial fraud is not the easiest thing to do, but it is an important part of saving yourself a lot of time and headaches down the road should your financial information ever be compromised. The fraudsters and scammers are getting better and bolder in their approach to taking your money, using phone calls, skimmers, and hacking.  Cybersecurity issues are becoming a daily struggle for businesses; thousands of customers’ information can be compromised in a matter of seconds, including yours. The more often we make our information available, such as through purchases with retailers and other companies for goods and services, the greater the risk having our information being stolen. It is important to take the necessary steps to protect yourself from financial fraud.

There are several ways to protect yourself and your information from financial fraud. Here are five ways you can start protecting yourself today:

Review and monitor all of your accounts regularly

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                Take the time to log in and review all of your cash and credit accounts on a regular basis. Monitor the transactions that are coming through your accounts. A general rule should be that the more you use an account, the more that you should be monitoring that account to help you catch fraudulent charges quickly. The longer that you wait to review your account transitions, the better the chances of a fraudulent charge going undiscovered.

Sign up for alerts on all your accounts

                Almost all financial institutions offer account security alerts that will allow you to receive text messages or emails in real time based on specific scenarios under which you would like to be notified. Some examples include logging in to your account from an unknown computer or device, charges outside your normal spending habits, and low balance alerts. Currently many financial institutions offer security alerts for account usage from outside your geographic area. For example, should your account have a transaction in New York while you are at the gas station in Los Angeles, security alerts can notify you via text and email of the discrepancy and ask whether you made the purchases and allow you to reject fraudulent purchases immediately.

Never use debit cards for online purchases

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                No matter how safe you are using your credit card or debit card, there is no way to be absolutely certain that you can avoid credit card fraud all of the time. You can limit your exposure to fraudulent charges by paying with the right card. Most major credit card issuers offer 24-hour fraud protection and identity theft assistance to catch fraudulent transactions as quickly as possible and limit interruptions to your credit card use as possible. Most credit card providers also guarantee the cardholder will not be liabile should a fraudulent transaction occur. However, should you be using your debit card that is attached to your checking account and your information is compromised, the accounts that you use to pay your bills could be drained before you realize the fraud is happening. A Regulation E claim can be filed with your financial institution to dispute such charges, though this can take several days or weeks to be resolved, leaving you without money to pay your bills in the meantime.

Change your account passwords on a regular basis

Your passwords are an important link between accessing your finances and keeping you financial data safe. Changing your passwords frequently reduces your risk of exposure should there be a breach with one of the companies you use or should you unintentionally provide it to a fraudster.  Changing your password regularly means that even if an old password is discovered, it will no longer be useful.

Also, do not use the same password for different logins with different companies, should someone gain access to your information they would be able to use it on other sites including but not limited to your email.

Check your credit

You should be checking your credit at least once a year from each of the three major credit reporting agencies: Equifax®, TransUnion® and Experian™. You are entitled to one free credit report from each of the three major credit reporting agencies every year for your review.  This does not entitle you to a credit score, which will come with an extra cost. However, many credit card providers provide monthly credit report tracking tools free for as long as you have an account with them. These programs will vary with every company but are a useful tool to track and watch your credit profile.

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There are also credit monitoring services, which, for a monthly charge, alert you instantly of all activity relating to your credit, provide all updates from your creditors, and even lock your credit completely. Assisting in detecting suspicious activity early can help identify unauthorized queries and prevent financial fraud or identify theft.

Take the time to protect yourself and others, know how to recognize the top scams, and report suspicious activity that could be financial scams and fraud to your state consumer protection offices.

Tell me your stories and your thoughts by leaving a comment below. Let’s have a better money conversation.