High Heels and Finance: Report Cards
I always believed that once I graduated from college, I would never have to worry about report cards and grades again. How wrong I was. As adults, we have the ultimate report card that follows us through every career choice we make and every town we move to. It even follows us into our personal relationships. It’s our credit report. How many times have you been told to check your credit report? Have you ever wondered what that report means, the best place to get it, what to do if there are errors in your report and how to improve your credit score?
Let’s take those questions one at a time…
What does my credit report include? What does my credit score mean?
Your credit report contains four categories of information:
1. Personal identifying information: your name, address, Social Security number and so on
2. Record of credit accounts: A list of all of your accounts and details about when each account was opened, the latest balance, your payment history and so on
3. Bankruptcy filings: Indicates is you’ve filed for bankruptcy in recent years
4. Inquiries: A list of every entity that has pulled your credit report because you’ve applied for credit
Your credit score is different than your credit report. Your credit score is a three digit score determined by the information in your credit report. Lenders use your score as an indicator of your likelihood of defaulting on a loan. Your score will range between 300 and 850. Like your grades in school, higher numbers are better. Credit scores below 620 are not good, and lenders consider these loans risky. With some types of loans (such as home equity loans), you may need a score of 760-780 in order to receive the best rates.
Where do I get my credit score?
As was the case for your report card when you were a student, you are entitled to receive a free copy of your credit report once per year from each of the credit bureaus (Equifax, Experian, TransUnion and FICO). If you visit www.annualcreditreport.com, you can view and print copies of your report from Equifax, Experian and TransUnion. For FICO, you will need to visit www.myfico.com.
How do I get errors in my credit report corrected?
If you find an error in your credit report, DO NOT assume the information is correct!
If the creditor is completely foreign to you: Often times, personal credit problems are a result of someone else’s negative information landing on your credit report. If the bad information is completely foreign to you, tell the credit bureau and explain that you need more information because you don’t recognize the creditor. If the creditor made a mistake: You need to call the creditor to get them to make a correction with the credit bureau.
When making these calls, take good notes. Ask for names, extensions, don’t be afraid to follow up and don’t be afraid to ask for a department manager if you aren’t getting results. By law, bureaus are required to respond to a request to fix a credit error within 30 days – make sure they do!
How do I improve my credit report and score?
• Get all three of your credit reports and check them twice. Correct errors and especially be sure to get accounts removed if they aren’t yours.
• If your report includes late or missed payments that are yours but are more than 7 years old, ask to have them removed. This also holds true for bankruptcies more than 10 years old.
• Pay all your bills on time.
• Be loyal. The older the age of a credit account, the better your credit rating. Closing old accounts and opening a bunch of new ones generally lowers your credit score. However, you shouldn’t hesitate to move balances from a high interest rate card to a lower interest rate card, and don’t be afraid to refinance if it makes sense for you.
• Limit your consumer debt. The more loans, especially consumer loans, that you hold and the higher the balances, the lower your credit score will be.
• Pay down credit card debt.
I hope you get straight A’s this year!
