Consumers hear a lot about credit scores and why it’s important to keep them within a healthy range. But there’s another best practice that’s key to improving and maintaining good credit: reviewing your credit report.
Credit Score vs. Credit Report: What’s the difference?
Credit Score: A number calculated by the credit reporting agencies, based on your credit report, to rank your creditworthiness.
Credit Report: A detailed report of your financial history, including age and number of credit lines, repayment history, and types of credit.
Your credit report contains personal information about where you live, how you pay your bills, whether you have filed for bankruptcy, or if you’ve been sued. It lists inquiries that have been made about your credit as well. When you apply for a new credit card and the company says it’s running a credit check, it’s looking up your credit report to review your financial past.
Get the Facts for Free
When you are trying to improve your credit score, it’s important to track your credit by ordering your free reports from www.annualcreditreport.com. You’re entitled to a free credit report once every 12 months from each of the credit reporting bureaus, Equifax, Experian, and TransUnion, through this website. Many financial advisors suggest that you stagger your requests over those 12 months so that you can monitor them for accuracy and changes.
Keep in mind, your credit report will not provide you with your credit score. You can contact the credit bureaus directly to order your scores for a fee, although some financial institutions will provide customers with their credit scores as a courtesy.
If You Find a Mistake
The credit bureau and the company that provided the information to the bureau are both responsible for correcting errors found in your report. If you find any errors, you can dispute these and get them corrected by following these steps:
Send a dispute letter to the reporting company documenting each error on your report.
Send a letter to the creditor who provided the incorrect information.
Explain why you dispute each item and request that the errors be removed or corrected.
Include copies of documents that support your position.
If your dispute results in a change to your report, the credit bureau must give you a free copy to review.
Ask the company to send notices of correction to anyone who requested your credit report in the last six months.
Reviewing your credit report and seeing your financial history in detail can help you see where there is room for improvement. Staying within your budget, paying off your debts, and limiting your credit cards can set you on the path to a higher credit score* and more favorable loan terms.
*We are not a credit counseling or financial advisement firm. This information is for educational purposes only and is not to be taken as guidelines or guarantees to improve your credit or financial situation.