Amanda Peterson
March 15, 2023
• 4 Minute Read
Spending wisely heavily revolves around your credit report. Why, you may ask? When you have a poor report - or a poor credit score for that matter - it makes it really hard to buy anything of importance, such as a car or even a house. If your report is plagued with incorrect information, you may be on the hook for charges that you've never incurred, thus dragging your score down. With a low credit score, you will pay higher interest rates and fees on credit cards and loans, or be declined from credit altogether. This is why our Wise Spend Wednesday discusses the importance of checking your credit report.
What is the difference between a credit score and a credit report?
A score and a credit report are closely related, but not the same thing at all. A score is a three-digit number that represents your credit risk. This number is calculated from information that can be viewed in your credit report.
A credit report is a record of all loans, debts and credit card accounts for an individual. This report contains important information, such as payment history, credit limits and dates accounts were opened or closed.
Lenders use a person’s score and credit report together to determine if they will loan money to potential borrowers.
Who is able to view my credit report? Is this information confidential?
The Fair Credit Reporting Act (FCRA) sets guidelines about who can access your credit report. Financial institutions such as banks and credit card companies can view your credit report regularly if they wish. If an institution views your credit report it must be for financial reasons, such as evaluating whether or not you qualify for a loan or to determine your interest rate.
In some cases a person will need your written permission to view your credit report. However there are situations where no permission is needed, such as when a court order is issued. This means that an employer could not view your credit report without your written permission, but the court system could access this information without checking with you first.
How long will a missed payment be visible on my credit report?
Late payments can stay on your credit report for up to seven years. However they don’t always appear for this long.
Your score is calculated by an algorithm that takes many factors into account. This algorithm takes into account how long ago the late payment was as well as whether it was a one-time incident. For example, a single late payment from three years ago will not impact your score very much, but two late payments several months apart in the previous year will significantly lower your score.
The impact of a late payment on your score also depends on exactly how late the payment was. A payment that was 30 days late will impact your score less than a payment that was 60 days late. A payment that is 90 days late or more will have an even more negative impact on your score.
Payments that are 30 or 60 days late probably won’t have a long-term negative impact on your score as long as they’re a one-time occurrence. They may lower your score in the short term, but they shouldn’t negatively impact your score for too long. However, payments that are 90 days late or more can have a lasting negative impact on your score. They are much more serious and can lower your score and show up on your credit report for up to 7 years.
Can disputing errors on a credit report improve credit?
Yes, disputing errors on a credit report can improve your credit. If you notice an error on your credit report, you should contact the credit bureau (Experian, Equifax or TransUnion) that is reporting the error. For example, if one of the credit bureaus reports that you never paid your credit card bill when you did, your score could drop dramatically. If the credit bureau fixes the error, your score will be restored and your credit will no longer suffer.
Errors occur for a number of reasons. A common cause of errors is files getting mixed up. Another example is that the financial information of someone with the same name as you may show up wrongly on your credit report. By contacting the credit card bureau that has reported the inaccurate information, you can get the error removed from your credit report. The three major bureaus allow you to report inaccuracies online or by phone.
Wrapping It Up
In the end, it really does matter what is on your credit report. As a complete record of all of your loans, debts and credit card accounts, this report contains important information, such as payment history, credit limits and dates accounts were opened or closed that helps you obtain financial assistance in the future. Make sure you keep tabs on all of this from time to time, and especially work hard at keeping it cleaned up if you have aspirations of a large purchase in the future.
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