Your credit report is one of the most important financial documents concerning whether or not you will be able to get loans and how much interest you will have to pay on those loans. Understanding your credit report is therefore very important.

One of the first things to understand about your credit report is that it is not the same as your credit score. These are two different things altogether. Your credit score is determined by the information on your credit report, which is why it is so important that consumers keep track of the information that is on their report and correct any mistakes as quickly as possible.

The second thing to understand about your credit report is that it is not a single report. In fact, it is three reports. These are kept by the three big reporting agencies: TRW, Trans Union, and Equifax. Each of these agencies maintains about 170 million credit files on individuals based on 2 billion items of information.

You are allowed by law to request one copy of your report from each agency each year. You can do this online or by mail. It is a good idea to check your reports annually. Of prime importance when checking your reports is your personal information. This is collected only for identification purposes and includes name, current and previous addresses, Social Security number, year of birth, employer, and the initial of your spouse’s first name if you are married. Any information regarding race, gender, religion, salary, medical history, personal assets, personal background information or lifestyle, and criminal record is not to be collected.

The major credit bureaus gather information supplied by your creditors. This information includes how much credit you have available, whether you have had any 30- or 60-day late payments, and whether any accounts have been referred to a collection agency. There can be more. Your credit report may also include any information that is part of the official legal public record, including bankruptcies, foreclosures, liens and any types of legal judgments that were assessed against you. Bankruptcies remain on your credit report for ten years. Other negative information is eliminated after seven years.

All of this information is then used to calculate a credit score. The higher your credit score is the better chances you have of getting credit from a lender and at the best interest rates. Conversely, if your score is low, you may find if difficult to get credit and if you do get credit you may have to pay higher interest on the loan.

In the event that you are denied credit based on your credit report, you are entitled to receive a copy of that report, free of charge. You must request the report and you must do so within a certain amount of time. Federal law requires the credit bureau that prepared the report to send you a free copy if you request it within 30 days after your credit application was rejected. The three big agencies will often allow up to 60 days.

While you are allowed one free copy per year, you can order as many as you like during the year, but you may have to pay a fee for them. The three major nationwide credit bureaus are TRW (1-800-682-7654), Equifax (1-800-685-1111) and Trans Union (1-800-888-4213).

An important factor that plays an important role in
maintaining a clean credit report is actually the
contents of your credit report. The credit report is
pretty much the story of your financial life,
contained in a detailed document.

The credit report carries the credit score, which is a
numeric ranking usually between 300 and 850. Several
lenders use the credit score to help them decided
whether you are worthy of a credit. More so, the score
is also used to determine your capability of paying a
loan. The credit report is important and cleaning or
maintaining a good credit report is vital to your
financial survival.

A Look inside the Credit Report

In a credit report, the first entry is normally your
personal information. It includes your name, listed
telephone number/s, previous and current addresses,
reported differences of your Social Security Number,
past and present employer and the date of birth.

The information regarding your credit accounts follows
your personal information entry. This is also listed
in detail and normally includes loans, the maximum
loan amount, and information of any joint account
holders or co-signers. The credit report also
incorporate a section, called Inquiries, which lists
any person who has recently requested a copy of the
credit report.

There are some states, wherein the credit report
contains public record information. This information
can feature overdue payments, bankruptcies or other
judgments in the court. Normally, these entries can
last for up to ten years and may affect your chances
of obtaining a loan negatively.

How to Start

Firstly, in order to clean your credit report, you
will need to order a copy of the report. You must
determine what is out of date or inaccurate, after
which you can submit a letter to the bureau requesting
fixes to the information. This process may take a long
time and you may be required to do several follow-ups
with each bureau before achieving a clean credit
report. However, to perform this correctly, you must
be aware of the information the credit agencies are
allowed to report and the duration.

Ordering a credit report can be easily done and
accessible to everyone, since at least one free report
can be obtained by the consumer each year; this rule
is also included under the FCRA or Fair Credit
Reporting Act. More so, the consumer is also allowed
to obtain a free copy of his or her credit report each
year from each of the three major companies handling
credit reporting, namely the Experian, TransUnion, and
Equifax. However, in case you have already obtained a
copy of your credit report this year, you may be
required to pay an additional fee if you want another
copy.

Once you have obtained your report, review it
carefully. Every detail must be inspected since
bureaus can sometimes confuse names, addresses or
employers. Most often, people who have common names
have credit reports that may contain information on
other variations of their name.

Additionally, it is important to perform a periodic
check on the credit report. It is advisable to order a
copy of the report once a year and dispute any
possible inaccuracies. Always take careful steps in
handling your payments and make sure not to make any
late payments. Time is of the essence and even minimum
payments should not be neglected. Remember that
carefully managing your credit can add as much as
fifty points to your credit score per year.