Credit Report

A credit report is a complete history of financial transactions conducted by an individual, a business or even a country over a fixed period of time. “Credit reporting agencies” are companies that keep these reports and provide their findings, for a fee, to banks and other financial institutions when people are requesting loans or credit.

Credit reports for nations and multinational corporations can be quite complex documents. They often require the work of numerous accountants and bookkeepers to account for inventories, investments, R&D, loans, stock options and numerous other factors that have no bearing in an individual credit report. Still, a business’s credit report, like that of an individual, is a reflection of creditworthiness, net worth and responsible financial stewardship.

All individual financial transactions such as credit cards, bank loans, mortgage payments and anything else that involves credit or loans are associated with your Social Security number, your full name and your address. And while that amount of information should be enough to keep everybody’s records separate and accurate, there are always errors.

Credit reporting companies such as Trans-Union and Equifax will send you a copy of your credit report. In fact, by law they are required to provide you one free report, annually, upon request. Reviewing your credit report every year is a good idea, as you will no doubt find things that do not belong there. Misfiled information from people with the same name, similar Social Security numbers or who are living at your prior addresses are some of the many reasons that mistakes end up on your report.

It sometimes can be frustrating, but you can have any and all incorrect items permanently removed from your credit report with a few letters and some telephone time with the reporting company. They want the information they provide to financial institutions to be as accurate as possible or their reputation gets tarnished along with yours.

Furthermore, if you are planning any type of borrowing in the near future – such as purchasing a home or a car – you should go to the trouble of checking and correcting, if necessary, your credit report prior to the transaction. Once you’ve started the purchase it’s too late to clean up your report and mistaken items that can lower your score, or even result in a denial of credit, can only be explained away after the fact.

Disputed charges that you don’t feel you should have to pay can be a double-edged sword. You may be perfectly justified in ignoring that bill from the guy who fixed your car poorly, but if he puts that delinquent bill on your credit report you’ll pay dearly one day if you need to borrow money. That one bill can easily result in higher interest rates on a mortgage or auto purchase that can cost you many times the original unpaid amount.

Should you get sued by a creditor for any amount, large or small, and the judgment goes against you, that information will end up on your credit report and remain there for seven years under federal law. There is no amount of complaining to the reporting companies, no kind of letters, that will get a judgment against you removed from the report. You simply have to wait it out, and make sure you don’t let it happen again.

It is possible, however, to insert explanatory information into your credit report. There are two types of filings that you can employ. The first is a simple explanation of how things may have spiraled out of control, causing you to incur late fees, a bankruptcy or whatever the negative charges are that you wish to explain.

For instance, if you were wiped out in Hurricane Katrina, which resulted in charges on your report, that explanation might make a future lender think twice about turning you down. There are no guarantees, but if there is some plausible explanation then you should include it on your credit report.

The other type of comments you can insert concern financial disputes. If for some reason you and a creditor cannot settle a dispute, and the creditor puts a negative comment on your credit report, you can insert your explanation of the events that caused the dispute in the first place. If your car was destroyed by the hurricane and you owed some money on it, but neither the insurance company or the lender would allow you to default, an explanation might help you.

Finally, it is important to note that according to the Fair Credit Reporting Act you have the right not only to insert these explanations onto your credit report, but you also have the right to remove them at any time and for any reason.

Keeping your financial state of affairs in order and keeping your credit report clean of errors and other problems will only serve to make your life that much easier whenever you need to borrow money or finance a major purchase. It’s not difficult and not time consuming – but it is extremely important.