Credit Report Fact or Fiction

By Chris Crowe

his month, we will wrap up or discussion on credit reports by attempting to answer some common questions and misconceptions about credit reports. Thanks to the internet, much of this information has recently become more widely known. However, there are still some old ideas and myths surrounding credit reports. Hopefully, this will help set the record straight.

“My credit score alone can determine whether or not I get approved for a loan.”

This is usually not true. A variety of factors can come in to play when a lending institution determines whether or not to extend credit. Your score is an important part of that decision since it provides a snapshot of your credit history. Certainly a higher credit score can make it easier to apply and get approved for credit. However, other factors are used. The ability to repay is a big factor. Based on your income, what does your proposed total debt payment look like? What is your employment history? How long is your credit history?

“My credit score can change a lot from month to month.”

Again, not always true. In a three month period, only about 25% of the population will have their credit score change by more than 20 points. Remember that the maximum credit score is 850, so that is not really that significant. Something serious like a bankruptcy, late payment, tax lien, or collection can drop your score significantly and quickly. Unfortunately, it takes time to improve your score. That’s why it is a good idea to check your score six months to a year before a major purchase like a home to make sure that there isn’t anything that needs to be fixed.

“I can’t do what it takes to clean up my credit so I need to hire a professional service to do it for me.”

This is not true. The fact is that what the credit counseling services claim to do for you can be done by you, the consumer, at little to no cost. All it takes is some time and some persistence. You cannot change accurate information on your credit report. You can work to remove inaccurate information. If a company claims that they can raise your score by removing negative information from your credit report that is accurate, they are either not telling you the truth or are doing something illegal. If you’ve had problems in the past that are properly reflected in your report, the best thing you can do is establish some type of current credit accounts and pay the bills on time. Serious derogatory items typically remain on your credit report for 7 years. The old saying that time heals all wounds can be applied to credit reports.

“It costs a lot of money for me to get a copy of my credit report.”

This is not true. In most cases, a credit report from all three credit bureaus can cost less than $50. However, help is on the way! There have been a lot of news stories lately about FACT Act. What’s that? It’s the Fair and Accurate Credit Transactions Act (FACT Act). It is part of the Fair Credit Reporting Act (FCRA Act). You don’t need to really know all of that. What you do need to know is that these acts will allow you to receive a free copy of your credit report from all three bureaus every 12 months. These reports do not contain your score, but they do have all of the information on tradelines in your credit history. The Federal Trade Commission is currently gathering information about what the bureaus can charge for the credit score. The generally accepted range is $4-$8 per bureau.

The FACTA is, a gradual rollout that started with the Western US on December 1. Residents of the Southern US will be eligible starting June 1, 2005. For more information, you can visit www.annualcreditreport.com. Finally, an important note. This official web site will not send out emails soliciting business. Beware of any emails you get claiming to be part of this new program or asking to verify personal information.

Hopefully, the past few articles have been helpful in unraveling the ins and outs of credit reports. It’s something that needs to be understood especially if you are getting ready for a big purchase like a house or car. Use this information to make sure you are on the right track to get the best deal for you. Don’t get caught in a situation where poor planning on your part makes it more expensive or not possible to make the purchases you want to make.

To order your free credit report after June 1, 2005, use one of the contact methods below:
Web: www.annualcreditreport.com
Toll Free: 877-322-8228
Mailing Address:
Annual Credit Report Service
PO Box 105281
Atlanta, GA 30348-5281