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Know the Truths about Credit Reporting

Reading and understanding your credit report can be a little confusing.  Credit reports are filled with all kinds of information and there are multiple versions.  Knowing how to read and understand your report is essential to your well-being…getting loan approval, credit cards, utilities and finding employment.  An easy way to understand your report is to know the truths about credit reporting.

Some facts about credit reporting are true regardless of what report you are looking at.  First, credit reports are an explanation of your credit history, like a history book about your recent credit.  It is NOT a current statement of your current legal financial responsibilities.  If a collection account appears on your credit report and you paid it off, that account does not just fall off your report because it is paid.  It will stay there for up to seven (7) years from the time it became a delinquent account.  This is because the history is what your creditors or potential creditors want to see. 

Second, the information on your credit report makes up your credit scorethe credit bureaus do not make your score.  The accounts listed on your report, including your payment history, balance, credit limit, age of the account and type of account are used to calculate your credit score.  Your credit score is a value number that is given based on the information included in your credit report at the time that the report is requested.  The credit information is literally run through a mathematical equation.  On a certain date and time, you can request your report and score, and you will get the credit score for your report that day—with the information that is appearing at that moment on your credit report.  The credit bureaus do not affix a number to you and assign you that score, and they do not manipulate or change your score.  Five main categories are used to compile your credit score. These include payment history, the amount of debt, the number of credit inquiries, the age of your accounts and the type of accounts.

Third, you are entitled to one free copy of your credit report annually.  Under the Fair Credit Reporting Act (“FCRA”), the federal statute enacted to protect consumers from the willful and/or negligent reporting of inaccurate information in their credit reports, you are entitled to a copy of your report from each of the three major credit reporting agencies.  You can request a copy of your free reports at AnnualCreditReport.com.  Going to Credit Karma or any other type of credit monitoring system where you get reports upon request for a small yearly or monthly fee is NOT the same credit report as getting it directly from the credit bureaus.  We discussed this difference in a recent blog post.  

Fourth, not all information is listed on your credit report.  Certain information is excluded from your report.  This information includes any salary information, bank accounts and investment accounts.  Only creditors report to the credit bureaus, not your employers or bankers.  That information is an accounting of your net worth and your credit report is an explanation of the history of your financial responsibility.  Also, no information regarding your gender, race, ethnicity or religious affiliation is included on your report.    

Lastly, under the FCRA, you are entitled to dispute any inaccurate or incomplete information with the credit reporting agencies.  Upon receipt of a dispute from the consumer regarding inaccurate information in your credit report, the credit reporting agencies must conduct an investigation into the dispute and contact the furnisher of information to find out the accuracy of the account information.   

For more information regarding your credit reporting or to discuss any problems you may be experiencing, contact SmithMarco P.C. for a completely free case review.

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