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This is How to Understand Your Credit Report in 2022

by Amarachukwu
This is How to Understand Your Credit Report in 2022

The term credit report has become a popular one whenever we discuss accounts, credit cards, loans and other aspects of human finance. It is particularly a prerequisite document that lenders ask for when reviewing an intending borrower’s loan application. Also, when trying to open a credit account, an applicant’s credit report is a necessary requirement.

A credit report is a document that summarizes an individual’s credit history. It is the go-to document for credit bureaus when they need information like your name, social security number (SSN) and address. It also tells them how many credit cards you have opened, your loan history and performance, when you are yet to clear your debts, it tells them how much you are still owing, and the frequency with which you pay your bills. It equally reveals if you have ever filed for bankruptcy or not.

Your credit report equally reveals the type of credit you are using at the moment (if any) and how long the account(s) have been opened. It also tells if you are seeking new credit sources and gives details if you have been previously arrested or sued before, including the circumstances surrounding the incident(s).

This is How to Understand Your Credit Report in 2022

Third-party lenders also contact credit bureaus and pay them to have your credit report if you approach them for lending. That is their own way of ensuring due diligence before they lend you money. In some cases, house owners equally run this background check before renting out their apartment to you.

Upon lending you money, these lenders notify the credit reporting agency who ensure that the recent transaction is captured and updated in your credit report. Your FICO score, which is also an integral part of your credit score, is also generated from the same credit report.

The Fair Credit Reporting Act (FCRA), which is a federal law in the US, requires that credit bureaus must ensure that all data collated and presented in a credit report is correct and dependable. However, on your part as an individual, you may want to check from time to time to ensure that all information therein is up-to-date.

This is How to Understand Your Credit Report in 2022

How can you get your credit report?

Your credit report can be made available to you or your lender upon request. For you to access the record, you will have to provide information like your name, your address, your Social Security Number (SSN), as well as your birth date. If you relocated within 2 years, you will also have to provide the details of your previous address.

The credit agency, in order to verify that your credit report does not end up in the wrong hand, may ask you some personal questions like the value of your monthly mortgage. This is their way of providing your information from getting into the wrong hands.

As a result of the Covid-19 pandemic, the US government has made weekly credit report requests free from the 3 leading credit bureaus in the country (Equifax, Experian, and TransUnion). You can get this report when you go to annualcreditreport.com or call 1-877-322-8228.

Since you cannot tell which of the three credit bureaus that the lender may approach for your credit report, it is always advisable to check with them all and ensure that what they have about you is uniform across the board. This is important to avoid discrepancies.

This is How to Understand Your Credit Report in 2022

How is your credit report maintained?

As stated earlier, three major credit reporting agencies (Equifax, Experian and TransUnion) maintain files on millions of American borrowers. Whenever lenders need to decide on a prospective borrower’s application, they approach any of these 3 agencies and pay for their credit reports to be released to them. They are permitted under the law to release the credit reports in their custody to creditors, insurers and other permitted business entities.

Aside from lenders, businesses also use the data in the credit report to evaluate applicants’ requests for credits, loans, insurance, and also before renting them an apartment. Some even consider it for employment exercises.

If for example, you apply for a credit card, the creditor will request a copy of your credit report from either one or more of the 3 credit agencies. The creditor then evaluates the information in the report to decide on your creditworthiness and the interest rate to offer you if you are certified credit-worthy. Upon approval, the creditor includes the tradeline (newly approved credit card) into your credit report and ensures the same is updated monthly.

The monthly update that lenders, banks, credit unions and other financial institutions reveal your performance on existing credits and loans and this affects your entire credit score.

This is How to Understand Your Credit Report in 2022

Errors in your credit report

A study by the Federal Trade Commission (FTC) reveals that 26% of respondents identified one error or the other on their credit reports. These errors could make them appear risky to lenders and mar the chances of their applications getting approved. Similarly, the Consumer Financial Protection Bureau (CFPB) also confirmed that the top of the list of complaints it receives is that of errors on consumers’ credit reports.

Needless to say, it is quite necessary to get these errors fixed as soon as they are noticed before they hamper your chances of taking that life-changing financial step. This is because such errors can be catastrophic to your ability to get loans or better terms of lending at favorable interest rates.

This is How to Understand Your Credit Report in 2022

Common credit report errors

  1. One of the common errors in credit reports is wrong names. Firstly, you need to identify where the error is coming from. Are you responsible for the error? Sometimes, you may find yourself guilty of applying for credits using different names.

For example, Dan, Danny and Daniel are different names. So, if you apply for 3 credits with these 3 names, that is an error and may affect your chance of scaling through.

You must also understand that with the information on your credit report, consistency is key. In the same way, you are expected to be consistent with your name, do the same for your address and Social Security Number.

  1. There is also the error of missing reports. If your application was rejected over a “no credit file” or “insufficient credit file” issue, this may likely be the case. It may be trying to tell you that all your credit accounts are not captured in the said report. Which means a part is missing in your report.

If a previous creditor has failed to appropriately file with the credit bureau, you will need to follow up and ensure it is rectified. After all, you are at the receiving end of the effects of the errors. This is also one of the reasons it is advisable that you do your own check often so as not to be caught unawares.

  1.  When someone makes an error while entering or reading your name, address or any other vital information about you. This clerical error, albeit unintentional, can affect your chances of getting your application approved.

When you notice such errors, do not hesitate to call the attention of the officers involved to it and see that they get it fixed as soon as possible if not immediately.

  1.  When credits are recorded in multiple entries. This error can pose a catastrophic threat to your credit report. This is because it is capable of misleading the officers in the bureau that you have more open credits or in higher debts than you really do.

Needless to say that this error is capable of placing your credit score in a not-so-good range, denying you better offers even when you deserve them.

 

How to fix credit report errors

The easiest and fastest way to fix errors on your credit report is to escalate to the credit agency and the institution that gave the information to the agency. Under the Fair Credit Reporting Act, both parties are saddled with the responsibility of correcting wrong data in your credit report.

You will start the process by informing the credit agency what information in your credit report is inaccurate, adding photocopies of documents to support your claim(s) and they usually carry out their investigation and get back to you within 30 days.

While making your grievances known, provide your complete name (in the right order) and address. Also, the point at the disputed item in your credit report, explain why you disagree with the information, and request that it should be corrected or deleted- whichever is applicable to your issue.

Similarly, contact the creditor or firm that provided the credit bureau with the data in question, informing them that you are disputing the information that they provided the credit bureau on your behalf.

You can also ask that they copy you in their correspondence to the credit bureau. This process may take between 30 and 90 days. You can equally check with the credit bureau for the progress report on their investigations.

For every complaint that you send either to the credit bureau or creditor, always try and have a copy (in the case where you submitted hard copies). Who knows, you may need them for reference. Also, if you are mailing a letter, ensure you use certified mail and request a return receipt.

 

What happens if the result of the credit bureau’s investigation does not favor you?

It is quite possible for the credit bureau to complete investigations and the decisions are taken are not in your favor. When this occurs, you can ask the credit bureau to include a dispute statement in your file and other reports in the future. Lenders that have been given a copy of the old report by the bureau recently will also be sent a copy of your statement. This service may come at an extra charge, but it’s worth it.

A copy of your dispute statement would also be included by the information provider whenever they send reports to the credit bureau within the investigation period.

If after all said and done with all investigations carried out, you are still not satisfied with the outcome, you may consider hiring an attorney to help you resolve the dispute as a last resort.

 

Who can ask about your credit report?

According to the Fair Credit Reporting Act (FCRA), the following individuals and firms can ask to look at your credit report;

Ø  You. You are the first person that can decide to take a look at your credit report. Taking a look at your credit report does not have a negative effect on your credit score. So, feel free to take a look at it whenever you feel like it.

Ø  Lenders. Whenever you apply for any form of credit, the prospective lender can ask to look at your credit report. From credit card companies to mortgage lenders, to auto lenders and other lenders like P2P lending platforms, your credit report is an integral part of their hard inquiry process. Note, however, that this aspect of your credit report check can affect your credit score. Although, they need your permission to go ahead with the check.

Ø  Landlords. Are you trying to rent an apartment? Then do not be surprised when the owner of the apartment asks to see your credit report. This is because, asking them to allow you into their property, you are asking them to trust you to be able to pay your rents as at when due. Therefore, they may want to verify that claim as to your ability to be responsible enough, and not owe their rents.

Ø  Insurers. When you approach insurance companies to cover you or a loved one or an asset, be ready to provide them with your credit report upon request. This is because the services they would offer you are financial too. So, they need to be sure that you can be a dependable financial partner. They also need your permission to access your credit report.

Ø  Employers. Sometimes, employers may ask to see your credit report whenever they are about to make decisions that border on hiring. However, they would need your written approval to go ahead.

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