Correcting your credit reports involves a series of steps: double-checking information on your reports, gathering evidence to support your claims, contacting the credit bureau(s) and the creditor, and then waiting for the investigation to take place.
Managing your credit score and your finances can be overwhelming. After all, there are so many different aspects to personal finance. And being financially healthy means knowing how to manage them all. You have to properly budget your money, save for emergencies, and maintain a basic understanding of your credit score. And if your score is suffering due to an error on your credit report, then it’s essential to take care of it immediately. Read on to learn more about credit scores and how to correct credit reports.
Credit reports are a big part of our financial lives. So knowing what they are and how they affect us is an essential part of financial literacy. But don’t stress if you’re not currently familiar with your credit report or score. You have plenty of time to learn, and CreditNinja is here to help.
Wait! What Is a Credit Report?
Think of your credit report like your financial report card. The only difference is that you probably won’t get grounded for a negative mark on your credit report. However, you will face financial repercussions, so striving for good marks is more important than ever.
Credit reports track your financial behavior throughout your life. They include information about loans that you take out, credit cards you’re using, and payments that you make. While it might sound creepy to know that your every financial move is being tracked, there are good reasons for it. And if you manage your money wisely, and understand credit card APRs and interest rates, you will probably have a good score.
Lenders, banks, and financial institutions use the information in your credit report to find out whether or not you’re a trustworthy borrower or customer. Even some employers and landlords have been known to check applicants’ credit reports to determine how responsible they are.
As you can probably imagine, having a good credit report will help you in many areas of your life.
Usually, a good credit report Will come with the following benefits:
- A higher chance of approval on loans
- Better access to credit cards and other financial products
- Lower interest rates on loans
These benefits can help you to truly master your money. Not to mention the fact that a good credit report may help you snag that job you’re interviewing for, or even the apartment you want to rent.
So now that you’re familiar with what a credit report is, you must know how they work and how you can improve yours.
How Do Credit Reports Work?
Now that you understand what a credit report is and its reason, it’s time to learn how it works.
Credit reports are created by a few different credit reporting companies called “credit bureaus.” A credit bureau is simply a company that tracks all of your financial behavior and compiles it into a report. The three main credit bureaus are Equifax, Experian, and TransUnion. Each of these three companies has a credit report for you.
Common things included in your report are1:
- Whether you pay your bills on time
- How many financial accounts you have (loans, credit cards, etc.)
- How much overall debt you have
- New financial inquiries
- Bankruptcies
- Loans or accounts in collections
The top factors are paying your bills on time and maintaining a reasonable number of credit accounts. So if you’ve ever wondered “is it bad to have multiple credit cards?” then the answer may be that it’s ok as long as you keep those balances at or around zero.
The information within these reports is used to assign you with a three-digit number known as a “credit score.” This score represents the information in your credit report and tells lenders whether or not you’re creditworthy. Creditworthy is a fancy way of saying financially responsible.
What Is a Credit Score?
Your score is just a three-digit number that shows financial institutions how you manage your money and your overall financial health. Because there are multiple credit bureaus, you will have multiple scores. One of the most widely known scores is referred to as the FICO score.
FICO stands for Fair Isaac Corporation, and this is a company that created a model for scores used by most lenders and financial institutions today. So it’s essential to keep track of your FICO score as you continue on your financial journey.
Along with the FICO score, companies may also look at your score with the other credit bureaus. This means that you need to be familiar with all of your scores so you know what to expect when applying for a new financial product.
Luckily, you can usually check your credit scores for free. Start by going to each of the individual websites for each credit bureaus and finding out how.
How Does a Credit Score Work?
The score you have with each of the bureaus is based on the information in your credit reports. The credit bureau will compile this information and give you a score, usually between 300 and 850.
Here’s a breakdown of the FICO score and categories that borrowers will fall into:
- 0–580: Bad credit. In this range, it will be challenging to get approved for loans, credit cards, line of credit products, and more. This score tells lenders that you may not be the most trustworthy borrower.
- 580–669: Fair credit. Once you’re in this category, you might see more approvals for certain products, but the interest rate you’re given won’t be ideal. Borrowers in this category are still a risk for lenders.
- 670–739: Good credit. You’re getting there! This is a decent range and will likely lead to more approvals, offers, credit cards, etc. You still may not get the best rates available, however.
- 740–799: Very good credit. This score puts you above the average US consumer’s score. This is a great spot to be in, and you’ll likely start to see some great offers and interest rates.
- 800–850: Excellent credit. This is the highest you can go in the world of credit scores. You have a score well above the average consumer’s, and you’re clearly an excellent and trustworthy borrower.
Although each credit bureau may calculate scores with slight differences, these categories are a
a good example of how it works. But exactly what information does the credit bureau look at to create the score? Great question!
Here’s a breakdown of how your credit report is compiled and the weight each category has on your overall score:
- Payment history = 35%
- Amounts owed (total debt) = 30%
- Length of credit history = 15%
- Credit mix (different types of accounts) = 10%
- New credit = 10%
This is the breakdown that the FICO score uses when determining your score. The other credit bureaus will have a similar breakdown, but there may be minor differences. So if it seems like your credit score drops for no reason, then look into each of these on your credit report.
Finding Credit Report Errors
Now to the fundamental question: how do you identify credit report errors, and more importantly, how do you dispute and remove those errors?
The first step is to be familiar with your credit report. You can’t find errors on it if you never check it. The good news is that you can receive a free credit report from each major credit bureaus at least once a year. Make sure to request this every year and thoroughly examine it for any errors.
Getting a copy of your credit report is as easy as going to each credit reporting company’s website and requesting it.
You can also visit annualcreditreport.com to request a copy of your credit report from each credit bureau.
Once you have a report from each credit bureau, it’s time to start scouring for credit report errors. It should be apparent if there’s an error on your credit report. It would be any false information that doesn’t pertain to you. Maybe there’s a negative mark for having a loan in collections, but you know that you don’t. Or there could be financial products on there that you never signed up for.
Remember that if any information on your report doesn’t look familiar or seems like it might be a credit reporting error, it should be noted. Please keep track of anything that looks wrong and write it all down. The next step will be to begin the dispute process.
Alerting The Credit Reporting Company
Unfortunately, credit report errors are all too common. Many Americans have seen their credit scores drop because of false information on their report. This is why it’s critical to monitor your report and dispute any errors.
Each credit bureau website will have a page where you can dispute information on your credit report, submit documents that support your position, and report identity theft. But we’ve made it simple by adding the link and mailing address to the dispute center for each of the credit bureaus:
Equifax
To file a dispute, visit: Equifax’s website
To mail it, download their dispute form and send it to the dispute center:
Equifax Information Services LLC
PO Box 740256
Atlanta, GA 30348
Phone number: (866) 349-5191
TransUnion
To file a dispute, visit: service.transunion.com/dss/dispute.page
To mail it, download their dispute form and send it to the dispute center:
TransUnion LLC
Consumer Dispute Center
PO Box 2000
Chester, PA 19016
Phone number: (800) 916-8800
Experian
To file a dispute, visit: www.experian.com/disputes/main.html
To mail it, download their dispute form and send it to the dispute center:
Experian
PO Box 4500
Allen, TX 75013
Phone number: (888) 397-3742
In Conclusion With CreditNinja
Finding inaccurate or incomplete information on your credit report may be unsettling, but it can be dealt with. And as long as you’re consistently checking your credit scores and reports for each credit bureau, you won’t miss an error that could sink your score.
If you do find an error on your report with any of the three major credit report companies, don’t panic. Whether it’s credit card debt you don’t have, or debt like installment loans, personal loan options, bad credit loans in collections, or identity theft, you can handle it. There is a dispute process in place for each of the three major credit report companies.
When you find an error, stay calm, report it to the company, and make sure you collect all of the supporting documents you may need and submit them.
Just remember, it’s not an uncommon thing to find an error on your report. It’s an unfortunate fact of life for many Americans that these reports do end up with errors from time to time. The biggest takeaways that CreditNinja thinks you should remember are as follows:
- Check your report often; you get a free report at least once a year.
- Scour every detail of each report to make sure everything is accurate.
- Immediately dispute anything that is not accurate and provide the documentation/proof.
- Once reported, the company will go about investigating and rectifying the error.
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