Consumer Credit Reports Basics

Understanding consumer credit reports basics benefits you financially

Consumer credit reports are a tool that lenders use to determine not only whether they will extend credit to you, but at what interest rate. A FICO score is a comprehensive examination of your credit information. Scores can be anywhere from 300 to 850, with a score above 720 considered “very good” and a score below 620 “risky.”

Factors that used to determine your credit report score include credit card activity, loans, balances and frequency of late payments. Credit reporting services compile all of this information pertaining to a consumer and supply it to potential lenders for a fee.

Under the Fair Credit Reporting Act, consumers can get a free credit report once every 12 months. It is important to take advantage of this service to check for errors and identify any unusual activity, usually indicative of identity theft. It is advisable that consumers do the following:

1. Research financial terms that are unfamiliar to you.

2. Contact the three consumer credit reporting services to obtain a free copy of your credit report.

3. Protect yourself from identity theft.

Educate yourself on consumer credit reports basics

Learning credit score terminology, how your credit score is calculated and how to dispute discrepancies in your credit score can help you improve your credit score. Improving your credit score will make you more marketable to lenders and may result in lower interest rates on future loans.

Obtain your free business credit report

It is advisable to request a free business credit report from the three credit reporting agencies to allow you to compare your FICO scores. If one of them differs significantly from the other two, this will allow you to identify the problem and work with the reporting company to have the problem corrected.

Use credit reporting to protect yourself from identity theft

Reviewing your credit reports is only one way to protect yourself from identity theft. Other steps you may take include shredding documents that contain information such as a PIN or social security number and not keeping sensitive information (such as passwords) in your purse or wallet.
Federal Trade Commission and Fight Identity Theft explain measures you can take to avoid becoming a victim of identity theft.

• Consumers can utilize credit monitoring programs offered by the credit reporting agencies as a way to detect identity theft in its initial stages. For a monthly fee, the credit monitoring services screens the three major credit reporting agencies (Equifax, Experian and TransUnion) and alerts the consumer of any changes or activity such as account inquiries and new accounts on their credit report.
• Business credit information is not subject to the Fair Credit Reporting Act. Therefore, one should exercise caution on any offers to receive free business credit reports.

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