How to Check My credit Report

"When you get your credit report (assessment of one's ability to meet their financial obligations), you'll be astounded to examine what the reporting office has listed and what it has deleted. All lenders do not subscribe to similar credit office, therefore you may notice that every office has just a few knowledge of your credit history and not the whole picture.

Look at the data that's obtainable on your credit report, as demonstrated in Figure. As an recognizing measure, your credit report lists your name, phone number, current and former addresses, Social Security number , spouse name, phone number, employer, your job situation, birth date, and your employer’s address.

Next comes the essence of your report, the existent credit history. Initially, the history can appear embarrassing because of the slightly secret nature of the report. The next stored names are abbreviations and codes. Monetary establishments where you have got credit. Figure provides you a thought the data you see, beginning on the left-hand side of the credit report:

Lenders’s name

Your account number

Ownership designation (I for individual; J for joint; U for undisclosed)

Opening date of your account

Number of months the report covers

Date of last activity

Total credit line extended for each account

Term of the loan: Amount of time you have to pay off the loan from the date it was approved

Current outstanding balance

Past due amount

Account status, which indicates the type of credit (R for revolving credit or I for installment loan), coupled with your payment rating (refer to Figure)

Date of last reporting by subscriber (creditor) to credit bureau (company issuing this report)

When you get your report, fastidiously check it for any mistakes and failures. Act to correct any negative ranks. Provide written evidence to the loaner make clear any mistakes. Surely, if negative ratings that are correct seem on your report, you can’t alter them. Negative ratings seem on your report for seven years.

How to Get a Free Credit Report

Before you apply for any type of credit, order your credit report and review the information registered. You can then straighten out any negative or inaccurate ratings before your loan application.

To acquire your credit report, contact one (or two or three) of the main credit bureaus in the U.S. by letter and request a copy of your report. For security purposes, they require your written authorization to release such information. Figure shows a sample letter.

You must accurately list all the pertinent information in this letter. Include middle initials, Jr. or Sr., if appropriate, and previous addresses if you have moved frequently. In order for the credit bureau to identify you further, include a copy of some identification, such as a driver’s license, an employee ID, or a paid utility bill. You should receive your credit report within two weeks after the credit bureau receives your payment and written request.

You’re entitled to a free credit report if a creditor denied your application within the last 60 days. Otherwise, you probably have to pay a service fee for each report. You can send your letter of request, check for the service fee and proof of identification to the local addresses of any of the three credit bureaus in your area. If no local offices are available to you, use the following addresses and toll-free telephone numbers of the headquarters of each major bureau. Call ahead to verify the amount of the service fee and any change in the headquarter address.

Experian (TRW)
P.O. Box 2104
Allen, TX 75013
(800) 831-5614

Trans Union
P.O. Box 390
Springfield, PA 19064
(800) 916-8800

Equifax
P.O. Box 740193
Atlanta, GA 30374-0193
(888) 397-3742

The Credit Report

The credit report is a compilation of your past and present credit obligations, as well as other pertinent personal information. The three main credit bureaus in the United States are Trans Union, Equifax, and Experian. All three report similar information.

The credit bureaus have customers, called subscribers, who review and rate your payment history and then transmit this information to the bureau. The subscribers include merchants/stores, banks, loan companies, other financial institutions, insurance companies, and, often, potential employers. Any time you apply for credit, the credit bureau is alerted.

Credit Decision Making Process

Looking at specific criteria that lenders use in their credit decision-making process can help you gain insight into the process as a whole. Lenders look for established money management tools and evidence of living within your means.

Employment

Creditors like stability in employment and consider employees who have been on the job a long time more likely to maintain their current earning capability and to repay their debts.

Residence

Length of residence is also an indicator of your stability. Your chances of receiving approval on your loan application are more favorable if you own your home. If you rent, the credit grantor is interested in your length of your present and previous residences.

Credit grantors consider the lengths of employment and residence as major factors when initially reviewing credit applications.

Occupation and income

A professional or a skilled worker ranks higher on a credit application than an unskilled or transient worker who may have jumped from job to job.

Consistency and a steady increase in income are other important factors in the credit decision-making process. Lenders like to see a progression in your income level and long-term employment, as opposed to job-hopping, seasonal work, and a varied income.

Your assets

Having a checking and/or savings account indicates that you’re already on your way to managing your money.

Adding to your savings account and managing your checking account wisely show the lender your responsible intentions. Lenders consider these two factors important initial steps in money management.


Current outstanding obligations

A loan application requires you to list all your current debts. You must list the balances on your current loans, bank credit cards (such as Visa and MasterCard), and store charge cards. The lender can then compute your debt-to-income ratio. Hopefully, this ratio indicates that you’re managing your debt well and living within your means.

Previous credit history

After you fill out the loan application, your lender orders a credit report. After the lender reviews the credit report, he or she knows your current obligations and your payment history. The credit report shows whether you pay your bills on time or late. If the credit report shows that you were late in meeting your payments, the lender assumes that you will continue this pattern and usually rejects your application for credit. If extenuating circumstances caused your late payments, be truthful and clarify the details.


Before applying for credit, you should obtain and review your own credit report, in case you need to clear up any negative information in it. Receiving your credit report may take two to four weeks, and clearing up errors can take six months.

Accuracy and honesty are key factors in completing your loan application. Additional debts appearing on your credit report but not on your application (known as undisclosed obligations) are reason enough for loan rejection.

Lenders are human, too; they show understanding to past credit problems if you can truthfully substantiate the reason for such problems and explain how you are now correcting them.

Credit scoring

In a credit scoring schedule, points are given to various categories. As you can see from the sample scoring schedule in Figure, higher points are awarded to such areas as professional occupation, higher income, lesser debt, and owning your home.
Take a minute now to circle the numbers in Figure that apply to your situation and them add them up. If you earn more than 16 points, you have a good chance of being approved for a loan. This credit scoring guide is merely a sample to help you understand the criteria used in the credit decision-making process. It is not a concrete system that all financial institutions use.

How Lenders Get My Credit Score

The decision-making procedure of loan confirmation isn’t smoothed. Lenders have to get your credit score. One lender could focus completely on the established guidelines of that specific lending institution and credit scoring; another lender may take into account the general impression you gave throughout your interview. Whatever technique the lender may use, the assessment of your creditability and your capability to repay the debt is the basic premise of credit approval. You can categorize the various factors concerned in getting an individual’s credit as character, capacity, and collateral.

Character

Your character forms your honesty, credibility, and willingness to repay your debt. The lender reviews your credit report, that indicates ratings of your past and present credit and answers such questions as:

• Do you repay your debts on time?
• Do you periodically exceed your credit limit?
• Where do you have attainable credit currently?
• How much credit do you have outstanding?
• Where have you had credit within the past?

The lender also looks for signs of stability:

• How long have you been on the job?
• How long have you been in the same line of work?
• Is your income verifiable?
• Do you own or rent your home?
• How long have you lived in the same place?

Stability is the key word here in employment and residence and in how well you have managed your past and present credit. The lender wants to know whether you will do the most to repay your debts even if you meet with a sudden financial setback. The lender judges your character and reputation.

Capacity

Capacity revolves around your ability to repay your debt. Your potential lender asks about your monthly income and current expenses in order to examine an important aspect of your capacity, the debt-to-income ratio. You can calculate this ratio yourself. Calculate the averages of three months of your income and expenses. Simply add the three months of expenses and divide by three to find the average. Do the same with the three months of income. Add the average of your three months of expenses to the monthly payment of the proposed loan you are requesting. Then, divide that amount by the average of your three months of income. The result is your debt-to-income ratio.

The debt-to-income ratio is a guideline to help you and the lender determine how much monthly debt your income can handle. If the ratio is over 45 to 50 percent, the financial institution may not give you any more credit because your income may not be able to handle additional expenses. The debt-to-income ratio varies among financial institutions; some allow for more debt than others do. Ask before you apply.

Collateral

Collateral includes stocks, bonds, CDs, savings accounts, or property that you own and that you can pledge as security of repayment of your loan. Having collateral to pledge helps you overcome other areas of your loan application that may be lacking credibility or stability — if your lengths of employment and residence are too short to qualify for the loan you want. You can liquidate, or cash in, any assets such as savings accounts, certificates of deposit, stock investments, or property to pay off your loan if you are unable to do so otherwise.