Credit

So many of us who are trying to buy a home, a car, or even just to obtain something as simple as a credit card are finding it difficult. Mainly because of the shape of their credit. Unfortunately many of us aren’t exactly sure what kind of credit we have. Do we have a really horrible score or is it something that can be easily fixed?

Maybe you still don’t have any credit. One thing that people prefer to do to put their minds at ease is to obtain a free credit report, which can easily be done on the internet. The best companies to use are Experian, Transunion, and Equifax.

Of course once you get that report you may find it difficult to read and understand. There is so much information and numbers and things that you have never seen before and therefore are utterly confused. First off, every credit report is split into four sections. The identifying information, the credit history, the public records, and inquiries.

The identifying information is just that, information to identify you. Look at it closely to make sure it’s accurate. It’s not unusual, for there to be two or three spellings of your name or more than one Social Security number. That’s usually because someone reported the information that way. The variations will stay on your credit report. Other information might include your current and previous addresses, your date of birth, telephone numbers, driver’s license numbers, your employer and your spouse’s name.

The next section is your credit history. Sometimes, the individual accounts are called trade lines. Each account will include the name of the creditor and the account number, which may be scrambled for security purposes. You may have more than one account from a creditor. Many creditors have more than one kind of account, or if you move, they transfer your account to a new location and assign a new number.

The entry will also include, when you opened the account, the kind of credit (installment, such as a mortgage or car loan, or revolving, such as a department store credit card), whether the account is in your name alone or with another person, total amount of the loan, high credit limit or highest balance on the card, how much you still owe, fixed monthly payments or minimum monthly amount, status of the account (open, inactive, closed, paid, etc.), and how well you’ve paid the account.

Some reports are incredibly easy to read and understand. They will state in plain words if they are still collecting payments, or have finished collecting. Other reports use payment codes ranging from 1 to 9; an R1 or I1 on a report is an indication of a good payment history on a revolving or installment account.

The next section is the part you want to be absolutely blank. The public records section is never a good story. If you have a public record on there, you’ve had a problem. It doesn’t list arrests and criminal activities; just financial-related data, such as bankruptcies, judgments and tax liens. Those are the monsters that will trash your credit faster than anything else.

The final section is the inquiries. That’s a list of everyone who asked to see your credit report. Any time anyone gets into the report, it’ll post an inquiry. If you call the credit bureau and ask for a copy, it will be on there. It’s a very detailed entry record. It’s great for the consumer. Inquiries are divided into two sections. “Hard” inquiries are ones you initiate by filling out a credit application or taking your child to the orthodontist. “Soft” inquiries are from companies that want to send out promotional information to a pre-qualified group or current creditors who are monitoring your account.

You may have heard that a large number of inquiries can have a negative impact on your credit score, but you’re probably OK. Most of the inquiries are ignored by the FICO scoring models. For example, the model has a buffer period that ignores inquiries within 30 days of getting a mortgage or a car loan. It also counts two or more “hard” inquiries in the same 14-day period as just one inquiry.