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How to Read Your Credit Report

Studies have shown that purchases made on credit cards have ballooned in recent years. This means that outstanding credit card balances and the number of individuals carrying plastic has ballooned too. So it makes sense to review exactly how this affects your purchasing power and financial future.

This article will define "purchasing power" as the ability to buy any good or service over time. As you know, when you apply for a mortgage, an automobile loan or a personal loan your credit is checked.

However, some people may be unaware that potential employers, landlords, and utility companies may also request your credit report.

With our society relying so much on credit, can you see how your "purchasing power" may be affected if negative or incorrect information is on your report?

Below is a basic outline on consumer rights regarding credit, disputing incorrect information on your credit report, adding comments to your report and finally, how to read a credit report.

1) Your Consumer Rights

The Fair Credit Reporting Act, enacted in the early 70s outlines credit rights. A request for your credit report must be used in conjunction with one of the following reasons:

  • In connection with a legitimate business purpose
  • In response to a court order
  • Your written instruction
  • Extension, review or collection of credit
  • Underwriting of insurance
  • Employment purposes
  • To determine eligibility for a license

2) Who Evaluates your Credit Report?

Credit reporting agencies do not evaluate your credit worthiness. These companies merely gather the information. The creditor, requesting your report makes the decision to grant or not grant you credit. Their decision to based upon the information they receive from the agency. (other factors may also a play role including your income, debt ratio, etc.)

Some of the the larger credit reporting companies are:

  • Experian - Purchased the files of TRW
  • Trans-Union
  • Equifax

Many smaller credit reporting agencies also exist.

3) How to remove blemishes from your Credit Report

Our society has become credit happy, thus ensuring all the information on your report is correct is vital to your financial health. You cannot remove legitimate negative information from your credit report, but you can clean up your report. Let's take a look at few examples below:

Example #1: You lose your job and did not have income for 3 months. Unfortunately, you were delinquent on your bills during that time. Because you cannot remove legitimate information from your report, the next best thing to do is write a letter the three major credit reporting agencies. The purpose of this letter is to explain why you were late for the three month time period.

Request this letter to be added to your report. When potential creditors request your credit report they will also receive a copy of your letter of explanation. Potential creditors will know the reason for the late payments was because you were unemployed and not a deadbeat. Keep the letter between 50-100 words

Example #2: Upon review of your credit report you find inaccurate or incorrect information. The way to fix it is to write a letter to each credit bureau and inform them they have inaccurate or incorrect information in your file.

You must specify exactly what is incorrect and why you think it is incorrect. Once the bureau receives your letter they must investigate your claim. 

If the information is incorrect, the credit bureau must fix or delete the mistake. If the bureau finds the information is correct and you are wrong, you can still dispute the claim by writing a statement explaining your side.

Again, write a letter explaining the situation and ask the credit agency to add it to your report. (remember, keep it between 50-100 words)

4) How to get a free credit report

The way to get a free credit report is to ask. However, before you ask you must meet certain cretria.

  1. You have been denied credit, because of your credit history, within the last 30 days.
  2. You have been denied insurance, because of your credit history, within the last 30 days.
  3. You have been denied employment, because of your credit history, within the last 30 days

5) How to read your credit report (in brief)

At first glance, your credit report may appear to be written in a foreign language. It contains abbreviations, a bunch of dates, and endless strings of letters and numbers. Since each reporting agency's report is a little different, let's just look the one section that is probably the same: definitions of the Consumer Payment History.

  • C means Account is current
  • N means Current/zero balance not updated
  • 0 means Current/zero balance updated
  • 1 means 30 days past due
  • 2 means 60 days past due
  • 3 means 90 days past due
  • 4 means 120 days past due
  • 5 means 150 days past due
  • 6 means 180 days past due
  • 7 means making payments under arrangement (debt consolidation company)
  • - (dash) means no history for that month

The above definitions are from Experian (TRW)

(As mentioned earlier, each reporting agency may have a different definition for symbols or numbers.)

Also, don' forget to read the other financial tips offered on this website. They are designed to get your entire entire financial house in order.

We hope this information has helped to clear up some of the mystery regarding your credit report. Good Luck.

In addition, learn about an online resource that allows you to learn which credit cards you qualify for based on your credit history and circumstance. This is accomplished without adding another damaging inquiry to their credit file.

No credit inquiry is reported on your credit report. This is an ideal tool to search for the credit your deserve!

If you are looking for a customized approach to debt consolidation Click Here for a Customized Debt Consolidation Program to get out of debt...fast!

In addition, FreeCreditSearch.com is a completely FREE web-based resource for credit card seekers. We provide real-time unbiased information to help you,  the consumer,  make informed decisions about your credit. This means that by filling out our simple credit profile, you can find out which banks and credit cards will approve you BEFORE applying!

Finding the right credit card can be a real challenge. FreeCreditSearch.com is today's  premier web-based credit card finder. FreeCreditSearch.com was developed to assist consumers in finding credit cards that fit their individual credit profile with a simple, fast and easy online search. When you use our FREE service, you will be able to review up to 10 different credit card offers moments of your search -- and all with quick one-click access to APPLY for these cards. 

When you use our service, you will receive FREE results with the following information:

  • The NUMBER of credit cards for your review
  • The TYPE of credit cards available
  • Quick one-click access to APPLY for these cards

Your no-obligation FREE results will be available within minutes of submitting your application. We  WILL NOT pull a credit report to complete this search. Your results will be emailed directly to you after your search is complete.

Take the first step toward taking control of your credit and Click Here to find out about your credit score!

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