Building a Better Credit Report

When your credit history has taken a severe beating, it can feel like you will never again enjoy the privileges of credit. Fortunately, there are things you can do to build a better credit report.

Before you begin to build a better credit report, however, you need to understand what your credit report actually contains.

Inside Your Credit Report

A lot of focus is placed on a person's credit score when credit repair is discussed. The credit score is the teaser for the story your credit report tells. There are four basic sections in your credit report:

Identifying information This typically contains personal information such as your Social Security number, previous and current addresses, telephone numbers and date of birth.
Credit history This is a list of companies that have extended you credit. Each company that reports your payment history will include the amount of debt you owe, payment type, payment history and status of your account.
Public records This is perhaps the most damaging section of your credit report. If this section has anything in it, this means some form of legal recourse was taken such as bankruptcies, foreclosures, evictions, other types of judgments or tax liens. If something ends up here, you pretty much have been double hit for the same occurrence -- once in this section and once in your credit history.
Credit inquiries There are two types of inquiries that will appear -- hard and soft. Hard inquiries are those where you give permission for the credit check such as for employment or loan applications. Soft inquiries occur when a company inquires to prequalify you for a credit offer or from current creditors who are monitoring your account.

Your Credit Report's Story

When you apply for a job, mortgage, auto loan, credit card or to rent an apartment, your credit report will be viewed. What your credit report states will determine the outcome of your application. If your credit report is laden with negative reporting for payment history, judgments and outstanding debt, you may receive a flat rejection.

Certain negative marks on your credit report can lower your credit score, but not enough to bar you from receiving credit or getting a job. Even though you may be able to get a loan or a credit card with negative marks on your credit report, you may be limited to what you can receive. For credit cards, you will not be able to obtain a high credit limit and your default APR will be high. The type of loan and interest rate you receive will be affected. For those looking to purchase a home, the negative marks on your credit report could mean the difference between obtaining a fixed rate mortgage with a low interest rate and a variable rate mortgage with a high interest rate. In dollars and cents, a negative credit report can cost a person hundreds of thousands of dollars

Build a Better Credit Report

You can't build a better credit report if you do not know what is on it. You should review your credit report at least once a year. The Fair Credit Reporting Act (FCRA) allows for you to receive a free copy of your credit report from each of the major credit reporting agencies -- Equifax, Experian and TransUnion -- every 12 months. You can request a copy in writing from each agency or visit AnnualCreditReport.com to request a copy of each agency's report. If you have already received a copy of your free annual credit report and wish to obtain an updated one before the year is up, you can contact the credit reporting agencies and pay for updated copies. Keep track of all debts owed and begin paying your debts on time. If possible, begin paying down outstanding debt and start using your credit wisely. If you are having trouble budgeting your debt, seek the assistance of a reputable debt management or debt counseling service.

Dispute Errors on Your Credit Report

Review your report and dispute any inaccuracies you find. If you paid off a debt but the report states it is delinquent, gather all of your proof of payment and dispute it with the credit reporting agency that shows the inaccuracy. The FCRA states that each agency must remove any items you dispute that were proven inaccurate. If the disputed items are proven valid, they will remain on your report. If a credit reporting agency will not amend or correct an item you have proven was in error, or if the credit reporting agency will not furnish you a copy of your free credit report, you can report them to the Federal Trade Commission (FTC).

Monitoring your credit report, making timely payments, paying down your debt and disputing inaccuracies are all proactive ways for you to build a better credit report.

ShawnTe Pierce