| Learn To Read Your Credit Score Your credit report contains very thorough information about how you have paid your bills over the years. Creditors type your record onto disc or magnetic tapes and send this information to three national databases. No human hands touch the data again and the national reporting agencies don’t even look at the information unless you force them to do so by written letter. Unfortunately, data entry errors are common in as many as one third of all credit reports, especially for people with familiar last names (Smith, Jones, etc).
You should pull your credit report at least once a year to make sure what is reported about you is accurate. Here’s what to look for:
Name, address, social security number
If you have a very common name, you should take extra care in reviewing the information reported just in case someone else’s data has landed in your file. Check the middle initial.
If you spot a different social security number or an address you never used for billing, someone else may be using your social security number to fraudulently obtain credit in your name. Identity theft is a “big business!”
The address information section details all previous addresses from way back to now. Sometimes the numbers and dates are wrong and that’s OK unless you have a very common name and want to make sure you are not being confused with someone else.
Accounts
Make sure you recognize the accounts. The creditor’s name is listed along with your account number (sometimes scrambled or missing 4 numbers for your protection). You’ll find the code for which database supplied the information (EF, TU, XP) which is useful in figuring out who did what to you. Here’s what the report indicates:
• Date you opened the account.
• Last time creditor reported to the bureaus.
• High credit limit and current balance.
• Monthly minimum payment.
• Number of payments you agreed to make (the term -shows when you’ll pay off).
• Whether the account is yours, your spouse’s or a joint account. (B, C, J)
• Type of account (R= revolving like a charge card, or I = installment like a car loan)
• How many times you were 30, 60 or 90 days late.
Public Records
Look at the public records. This is where judgments, liens, bankruptcies, lawsuits and foreclosures are usually reported. Bankruptcies and foreclosures remain on the report for ten years, so if they are older than that you can request that info be dropped.
Inquiries
Look at the inquiries. In this section of the report, anyone who has pulled your credit will be listed. Also, “promotional inquires” from credit grantors who accessed your name and address (not your credit file) are listed for your information. They post their inquiry before they offer you that “pre-approved” credit card in the mail.
Employment Information
The employment information section shows where you have worked and is useful in making sure this data is not someone else’s. The information in this section usually has the dates incorrect.
The Score
Numerous factors are compiled from your credit report in order to generate that mysterious number that has the power to transfer you out of lending limbo to homebuyer’s heaven. Take heart, though. Your pluses and minuses are averaged together.
The credit score can range from 300 to 850, and was developed to predict the likelihood of your filing a bankruptcy in the next two years. We have never seen anyone with an 850. We rarely see anyone in the 800’s, and those are the people who pay their bills before they come in the mail! Really great scores are 700-730, but they fall off quickly every 20 points: 680, 600, 620. Scores are not stored, and represent a one-time “snapshot” of your risk level.
Reason codes specify why your score was decreased and are given in order of importance. They help you isolate which factors in your credit report are hurting you the most!
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