Meeting with clients from Racine to Saukville to Waukesha, we find that very often people struggle to understand their credit reports.
Most people are aware that credit reporting agencies and bureaus - such as Experian orEquifax - keep tabs on payment histories. Most people are also aware that they can obtain a copy of their credit report (in most cases for free or for a minimal charge).
However, most people have no idea what's on their credit report, how to read it, or how to correct any erroneous information.
In this article, we'll take a look at six of the items that appear on a credit report, and show you how to fix any errors you may find.
Is your name, social security number, address and other personal information accurate? If not, contact the credit reporting agency to let it know it has made an error. A lending company would be skeptical of making a loan to an individual whose name and address (as listed in the credit report) are not consistent with the information provided to access the loan.
Note: Discrepancies, no matter how small they may seem to the individual, can cause financial institutions to not approve loans.
Open Account Information
The report will detail all of the individual's open credit card accounts. The report will spell out the individual's credit limits, whether the person has been paying his or her bills on time, and if there are any balances on the account.
In short, pay particular attention to the accuracy of this information because lenders use it to gauge whether they'll make a loan.
Note: Inaccuracies in this section are a major reason for why many loans are rejected.
Credit reports also detail information on any mortgages the individual may have outstanding. The reports indicate whether the individual has been late with payments, the account number of the loan and the date of mortgage origination.
The same information is available for any other loans that the individual may have outstanding including personal loans, home-equity loans, credit lines and other financings originated by a financial institution.
Note: Again, it is vital that this information is correct because if a lender perceives an individual as being saddled with too much debt (even if the information is incorrect), the lender won't approve the applicant for another loan.
Collections/Negative Account Histories
Credit reports will identify whether the individual has any accounts that are in collection and what the status of those cases is. Because this information can adversely impact the individual's overall credit score and affect whether they are able to obtain a loan, it is important that it is correct. Credit reporting agencies often offer services that will help you resolve these issues or provide you with general advice and strategies on how to improve your credit score.
Note: If there are any data discrepancies or misleading data presented, the individual does have some recourse (more on this below).
If there is a judgment or an award against a person in a court of law (stemming from a personal suit, small claims matter, etc.) those terms will be included on the report. More specifically, this section of the credit report will specify the case number. It will also identify the plaintiff and the defendant by name, give the status of the case (whether it is open or closed), and detail its resolution (meaning the amount that has been awarded).
Should an individual or some other entity have a lien on your property, that information will also be made available. Specifically, the case number, the court where the lien was established, the amount of the lien and its resolution (whether the lien has been released) will also be detailed.
Note: This information often causes problems for consumers because the lien may have been satisfied, and/or the judgment reduced or rescinded even if the credit report fails to reflect this. Keep your eyes peeled!
Bankruptcy information is also available and should be checked as well. Specifically, the report will outline whether it is an individual or a joint bankruptcy (with, for example a spouse). It will also include the amount of assets and liabilities the individual has incurred.
Note: Incorrect bankruptcy information (especially the date the bankruptcy was incurred) is a frequent source of problems for consumers looking to obtain loans.
Correct Erroneous Information
There is a space at the bottom of each section of the credit report where the individual may add his or her personal comments. For example, in a lien situation, the individual might say that the lien was established due to a misunderstanding with a vendor (and/or that it was promptly satisfied). The space may also be used to outline other discrepancies as well. For example, an individual could comment on a situation where the report document inaccurately portrays the individual's indebtedness, or if certain outstanding credit card balances listed on the report have been paid off. Finally, individuals may choose to briefly explain why they are in arrears on a certain debt payment.
As far as correcting information that is factually inaccurate such as the spelling of the individual's name or address, a person should present the credit agency with written proofs as soon as possible. If appropriately documented, the credit agency should make the appropriate changes on a fairly timely basis.
The Bottom Line
Try to obtain your credit report at least once a year and review it for any inaccuracies. If you spot any errors, have them fixed as soon as possible. You'll be glad you did.