Your credit file is the key to your credit history. A good or a bad mark on your credit file can mean all the difference between getting that car loan or the mortgage interest rate that puts home ownership in your grasp. Many people aren't aware of how credit file reporting works. Armed with knowledge of the procedure, you can defend yourself against unfair reports on your file.
What's Inside
Credit file reporting applies to a limited area of information. The file contains personally identifying facts, such as your name and Social Security number. The file will also show material from public records like bankruptcies, judgments and secured loans. Any information about companies that have made credit inquiries and third-party collection agencies currently seeking to collect a debt will be there, too. The system lists and scores your credit accounts on a scale of R0 to R9, with R1 being the best, R9 being the worst and R0 being a new, unrated account.
Disputing Your File
Sometimes false or otherwise inaccurate information goes on your credit report. While the road out of an inaccurate credit file report can be long and arduous, it's not impossible. You must send a certified, registered letter to the reporting bureau in question, which must respond within 30 days. Send another certified, registered letter to the reporting agency demanding proof of the negative information. If the information remains on your credit file, you have the right to add a 100-word statement about the issue. Consider consulting with an attorney as well.
Getting a Copy
Under the Fair Credit Reporting Act, you have the right to one free copy of your credit report from each of the three major credit bureaus every year. You have to request a copy -- the credit agencies will not supply you with one otherwise. You can write directly to one of the three agencies or utilize a website specifically designed to show you your credit report (see Resources). If you write to the credit bureau, include your name, address, Social Security number and any previous addresses where you lived in the last two years.
Credit Scores
A single number -- your credit score -- sums up your file. Creditors use this to determine whether to give you credit, how much they will give you, and the interest rate they'll charge. Credit bureaus determine your credit score using a complex mathematical formula based on how much debt you have, how old it is and the timeliness of your payments.
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