Understanding Your Credit: Credit ReportsBy Michael Hawthorne
Your credit report, and the credit score calculated based on your history, determine your ability to get new loans and lines of credit as well as the interest rates you'll pay. While the exact equations banks use to determine loan elgibility and rates are not available to us we do have a clear picture of what is on your credit report and the factors affecting your credit score.
Your credit report works as a ledger of sorts, logging your personal credit and payments history for (roughly) the last 7 years. Your credit report contains three types of information:
All lines of credit you have open with a bank now, or that have been open at any point in the last seven years, are listed. The report notes the type of account (mortgage, credit card etc.), the date opened, the associated credit line or limit, the account balance and payment history.
Whenever you request a loan or new credit card, the potential lender will pull your credit report. These kinds of requests are called voluntary inquiries. The report also lists inquiries made by financial institutions looking to pre-qualify you for a product (referred to as "involuntary" inquiries). Involuntary inquiries have no effect on your credit.
Collections and Public Records
Credit agencies track overdue debt records from collection agencies and monitor public records from state and county courts. Public records include bankruptcies, foreclosures, liens, wage garnishments, suits and judgements.
Get Your Credit Report
The good news is that you're legally entitled to a free credit report from each of the three major credit bureaus (Equifax®, Experian® and Transunion®) once a year. To get free reports you must use www.annualcreditreport.com. I've heard complaints about the site being a little clunky but it does work and it is free.
If you're looking for a comprehensive credit report and monitoring service, we suggest Lifelock Ultimate. Lifelock's Ultimate service gives you access to all 3 annual credit reports, monitoring of all 3 reports for risks, all 3 annual credit scores, a monthly update of your Transunion credit score and a range of identity protection services including surveillance of black markets for the sale of your personal information and attempts to open new lines of credit and checking and savings accounts using your personal information. The list of benefits goes on and you can read the full details at Lifelock. For a limited time, we can offer 10% off on all of Lifelock's identity protection plans. Check it out for yourself; you'll be as impressed as we are.
Now that you've finished reading about credit reports, it's time to discuss Credit Scores...