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Understanding Your Online Credit Report Before Getting A Loan
By EchoBay Loans Staff Writer

Your credit report helps decide whether you'll move into your dream house or drive to work in the car of your choice. It can push you into painfully high interest rates or deliver a zero-down home loan that's easy on your savings. Because of its power over your financial life, it's important to manage your credit report wisely-that means paying bills on time and reviewing your credit report regularly.

A good rule of thumb is to review your personal credit report once each year, which helps keep credit scores maximized and deters fraud & identity theft.
The U.S. Congress recently passed a law requiring the 3 bureaus (Experian, TransUnion & Equifax) to provide you a free credit report every year upon request. The implementation of the law may take 12-24 months or longer, but you shouldn't wait. Several credit reporting agencies and the 3 bureaus themselves can provide you with an instant online credit report right now.

What your credit report contains
Although credit report formats may vary in looks, they all contain the same categories of information, which include your personal profile, a credit summary, public records, credit inquiries, and your payment history by account. Credit reports can also be ordered with your credit score, an important item used by lenders to help determine your creditworthiness. While 3 in 1 credit reports often provide a free score from one of the bureaus, you must generally pay extra for scores to show up on all three reports.

Once you have your report, your primary task is to review it for accuracy

Reading the report sections

The personal profile section identifies each consumer by name, address, Social Security number and telephone number. Examine your personal information carefully. Small details can cause big headaches when left unchecked. For example, name modifiers like Jr., Sr. or III often create confusion, especially when parties share a name and address.

The credit summary assembles the details of the report into a consolidated table or list. It shows total filings of public records, total outstanding credit balances across all accounts, number of delinquencies (late payments, collection accounts) and also accounts paid as agreed. It's a good place to spot red flags that you'll look for further on in the report, especially in the account history section.

The public records section shows any liens, judgments or bankruptcies, and the credit inquiries section lists companies that have requested your credit report for various purposes. Some companies use your credit report data for direct marketing purposes, like the credit card companies stuffing your mailbox each week. These show as inquiries but they have no effect (except probable irritation); nor do requests that you make yourself for your personal credit report. Just watch out for the mall stores enticing you to open new accounts. Each one generates an inquiry and will ding your score slightly, even if you get turned down.

The account history section is where you'll want to spend the most time. Each account will show the total amount of credit (loan amount or credit limit); the balance owing; the date of last activity (payment or purchase); and whether an account has been "paid as agreed" or has late payments falling into 30, 60 or 90+ day late categories. Accounts that have been closed but that were held over the past 7 years will show too.

Go through each account with a fine-tooth comb-check every detail! Do all accounts belong to you? If not, a thief may have used your identity, in which case you should contact the creditor and reporting bureau immediately. Next, see whether any payments you've made don't show, allowing 30-60 days for payments to post. See if one bureau has reported the same account twice, or if there are two versions of the same account showing on a bureau's report that include an original and a collection version. You may be paying a double hit on your score in this scenario.

Don't close any accounts that are legitimate, whether positive or negative, unless you get specific counseling to do so by a credit scoring expert. That's because closing an account brings its "date of last activity" to the present, and if it is a negative account, it will drop your score because the scoring models read it as recent negative activity. (Same goes for paying off collection accounts or judgments in advance of applying for loans.) If you have a prior bankruptcy, see if any of the discharged accounts continue to report late payments; this would have a seriously negative, and unnecessary, impact on your score.

If you find errors in your online credit report, you can correct your credit report directly with the bureaus. The process takes 30-60 days. You can also use a rapid correction service provided by some mortgage brokers if you have applied for a home loan, which helps shorten correction time to 3-10 days with appropriate documentation.

Bottom line: your bottom line will stay healthier if you check your credit report regularly and repair credit issues that might be costing you a small, silent fortune.


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