Credit Reports are essential to provide timely and accurate credit information to any company that assigns risk. This includes any organization that loans money, and to most insurance companies. Credit reports are compiled by consumer reporting agencies, known as credit bureaus, and include information of both a negative and positive nature about your financial history. Credit bureaus then sell the information. A credit score (FICO) is a mathematically calculated number based on the information in a credit report. Credit ratings play a important role in investment decisions, and on one’s ability to access capital.

credit reportsCredit reports list your credit accounts including auto loans, credit cards, home mortgages, student loans, and other lending activities. Credit reports are used by creditors and lenders to decide whether to grant you credit, to insurance companies to decide whether to provide you an insurance policy, to landlords to decide whether to rent you a house or an apartment, to current or prospective employers, and to companies that mail unsolicited offers of credit known as inquiries.

You can request your free credit reports at www.annualcreditreport.com or by writing to Annual Credit Report Request Service, PO Box 105281, Atlanta, GA 30348-5281. When a lender orders your credit report, ask to see it (they usually get your credit score also).

If you discover an error on your credit report, write to the credit bureau and explain why the entry is incorrect. This won’t affect your score, as long as you order your credit report directly from the credit reporting agency or FICO. The errors might include someone else’s credit history (similar name), an entry that was never updated or should be removed, or a bill you challenge.

The FICO score counts inquiries or requests a lender makes for your credit report or score when you apply for credit. Inquiries usually carry the most weight if you have a limited credit history or if there are other existing issues such as late payments or high debt. One credit inquiry will usually take less than five points off a score. Some scoring systems consider the source of credit that a consumer uses, and consumers who rely on finance companies and other subprime lenders may receive lower credit scores. By comparing this data to hundreds of thousands of other credit reports, credit reporting agencies calculate a number that can be used to determine a level of credit risk. An agency’s credit score should also include its scoring scale and how scores are derived.

Only inaccurate information may be eliminated from your credit report. If accurate, negative information remains on your credit report as long as governing laws allow. Credit reporting agencies must investigate your contention within 30 to 45 days, usually by contacting the reporting entity to verify the information. They will then notify you that they have corrected your report, or that they believe the entry to be accurate. If you are successful in challenging information in your credit report, you should notify whomever you’re dealing with (bank, credit card company, collection agency, insurance company, court clerk, etc.) in writing.

You may request a “freeze” from the credit bureaus. A security freeze prohibits, with explicit exceptions, the credit reporting agencies from releasing the consumer’s credit report or any specifics from it without the expressed authorization of the consumer. The credit reporting agency may charge up to $10 for each placing, removing or temporary lifting of a security freeze.

To place a freeze, you must write to each of the three credit bureaus ( Equifax, Experian, TransUnion) using this example: Date Equifax Security Freeze P.O. Box 105788 Atlanta, GA 30348 Dear Equifax: I would like to place a security freeze on my credit file. Within 10 business days after receiving your letter to “freeze” your account, the agencies that compile the credit reports will send you a confirmation letter containing a unique PIN (personal identification number) or password.

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