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Understanding Your Credit Report

When it comes to your credit, a little knowledge and solid credit education can put you in control and help you reach your financial goals faster. The same is true for interpreting and reading your credit report.

Your credit report is an expansive collection of data pertaining to your credit history-in other words, your history of obtaining and paying off debt. Don't think this is limited to your credit cards-your report details almost every loan, mortgage and financial agreement you have ever made, even if those loans are paid and the accounts closed.

In essence, your credit report is a snapshot of the current and historical state of your credit, or creditworthiness. For this reason, it is a primary reference that lenders use when deciding to lend you more money.

Your financial future could depend on what is detailed in your credit report. Learning how to read your credit report - and being aware of the personal information it contains - is critical. With the right knowledge, credit reports can help you:

• Discover how lenders view your financial history
• Determine whether or not errors exist that taint the picture of your credit history, (which can hinder your ability to obtain loans)
• Find inaccuracies, which may hint at simple errors or something more serious, such as identity theft

The companies that compile credit information and generate credit reports are called consumer reporting agencies (or CRAs). There are three major credit bureaus - Experian, TransUnion and Equifax. The information these companies collect is stored in giant databases and is in turn sold to companies looking for information about you as they make decisions on lending, employment or insurance coverage.

There is more detailed information in your credit report than you might imagine. The most obvious is your personal information. This includes your name, current and previous addresses, your telephone number, reported variations of your Social Security number, and your past and present employers.

Following that data, information specific to your credit accounts, such as auto loans and credit cards (even your closed accounts), will be listed. Loan limits, outstanding balances, co-signers and your payment patterns are all part of the report. Be aware that if you are the co-signer on a loan or other extension of credit, you are as responsible as the primary loan applicant is for paying that loan back.

Your credit report also contains a section called "Inquiries," which is a list of parties that have requested to see a copy of the report. The Fair Credit Reporting Act allows only those credit grantors with a permissible purpose to inquire about your credit information without your prior consent. Other inquiries, for which you have given permission, may appear, such as those from landlords or employers.

Your credit report may also contain information of public record. Overdue child support payments, for instance, or bankruptcies and other court judgments may appear. Any of these points can remain on your record for up to ten years and negatively affect your creditworthiness. Any good credit you have will continue to build over time.

Remember, it's essential to understand the details of your credit report before you take action to improve it or begin resolving any errors. If you want a deeper understanding, make sure you seek out a "Certified Consumer Interviewer," certified by the Consumer Data Industry Association (CDIA). The effort saved with a little help from a financial specialist could go a very long way toward achieving your financial goals.