Aim: Financial Blog for Members

Understanding your credit report

July 21, 2014

Your credit history can have a major impact on your life. So why are so many of us in the dark when it comes to what ours says about our financial stability?

The basics

Anyone who has ever applied for a credit card, a student loan, a mortgage or a car loan has a credit report. It’s essentially a summary of your credit history. It tells whether you make payments on time, how much credit you have and how much you are currently using. If you have debts with a collection agency, have ever filed bankruptcy, or have liens or unpaid child support, that information is in your credit report.

In the US, there are three primary credit reporting agencies: Equifax, Experian and TransUnion. It’s the data reported to these agencies by lenders and debt collectors that determines your credit score.

What is a credit score?

A credit score is a 3-digit number from 300 to 850 that reflects how likely you are to pay back your debts. Your score is an indication of how financially responsible you are when it comes to requesting a line of credit and repaying debt.

Most people fall within the 600 to 750 range. A score of 700 or higher is generally considered good credit management, while a score under 400 is poor.

Why does your credit score matter?

Your creditworthiness is the difference between buying your dream house and continuing to rent. It affects whether you can buy a car or get a credit card, and the interest rate you’ll pay on a loan. It determines the amount of your security deposit when you’re opening an account with a utility company or leasing an apartment. Potential employers can even take your credit score into account when deciding whether to offer you a job.

Too much credit and credit managed poorly is financially unhealthy. But avoiding credit altogether is also a problem, since no credit history equals bad credit. Although you want to avoid debit, it’s good to establish credit and carry a small amount of debt in order to demonstrate fiscal responsibility.

It all comes back to the credit report

Your credit score is only as good as the information it’s based upon. That’s why it’s so important to be familiar with what it says—the good, the bad and the ugly. Because it’s also fairly common to find serious errors in your credit report that are affecting your overall credit score, it’s in your best interest to review yours regularly.

The federal government requires that each of the three credit reporting agencies provide a free copy of your credit report every 12 months. You can make your request individually through each agency’s website, or get all of them by visiting

You are also entitled to a free copy of your credit report if you have been turned down for a loan, if you are a victim of identity theft, or if you’re unemployed and job hunting.

Statute of Limitations

While good information like on-time payments and loans paid in full stay in your credit history forever, negative information like late payments and defaulted loans must be removed after seven years. Bankruptcies, however, remain on your record for 10 years.

How to review your credit report

A credit report starts by listing identifying information like your name, address, social security number and employment history. This often includes older information, like a woman’s maiden name or a previous address. You may notice several variations of your name, even misspellings. This doesn’t really matter, as long as it’s your information and not someone else’s.

Next is the Credit Summary, which tallies the total number of credit accounts reported, account balances, current delinquent accounts and the number of inquiries made against your credit in the past two years.

The Account History section follows. This is the main body of the report. Information about every credit account is detailed, including account number, type of account, whether it’s individual or a joint, the current balance, credit limit and the high balance (the most ever owed on the account).

Pay attention to the details

If you find items that are inaccurate or out-of-date or accounts that aren’t yours, it’s important to get that information corrected. Watch for payments wrongly recorded as late or current accounts listed as past due. Pay attention to credit limit information, loan amounts and account balances to verify they are accurate.

What if you find a mistake?

There are three ways to dispute information on your credit report: online, by phone or by mail. It may be quicker and more convenient to make a claim online or by phone, but keep in mind you’ll still have to mail in documentation or proof.

Reporting errors by mail takes more time, but you’re also generating a paper trail. Your letter should identify the incorrect information, and explain why it should be removed. Include any supporting documentation with your letter, and send it via certified mail, with return receipt requested. The credit reporting agencies are required to investigate your claim, and respond within 30 days.

How to improve your credit

Mistakes happen, but you aren’t doomed to a lifetime of high interest rates and rejection. Want to positively affect your credit score? Pay your debts on time. Pay more than the minimum due and keep your credit card balance at no more than 30 percent of your credit limit.

Show you can handle credit responsibly. Start small with a credit card with a low limit. Charge small purchases like gas and pay the balance off every month. Credit cards are the quickest way to improve your score.

You should also avoid requesting loans frequently. Every time you apply for credit, your score will take a hit. If you are constantly asking for credit, your score will decrease significantly.

And exercise patience. Rebuilding your credit doesn’t happen overnight. It will take time, but you can do it.

For more information about credit reports and improving your credit score, contact an LGFCU Financial Advisor at or call 877.367.5428.

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