How to review your credit report
Periodically reviewing your credit report and checking alternative credit bureau reports is an important first step in financial health. The FACTA (Fair and Accurate Credit Transactions Act) gives you free access to review your credit report once a year.
You can get one free credit report from each of the big three credit reporting companies every 12 months. Go to AnnualCreditReport.com or call 1-877-322-8228. Some of the credit bureaus will give you more frequent access. You can also get your ChexSystems report at ChexSystems.com and most other alternate bureaus through forms on their websites.
Once you have your report you will want to verify that all the information is correct. Data stays on your credit report for 7-10 years, so making sure it is correct is very important.
Here are a few terms you should look for:
Make sure your report is accurate and check for:
Incorrect name, address, or phone number
Wrong social security number
Addresses you don’t recognize
Accounts that you don’t recognize and don’t seem to match credit that you have taken out
The status of your accounts, for example if an account that you think is closed actually shows as open
Hard inquiries that you didn’t authorize
What to do if there’s an error on your credit report
You have rights under the Fair Credit Reporting Act (FCRA), which helps ensure the fairness and privacy of the credit bureau information. It allows for you to challenge or dispute the information that is on your credit report.
If you find something wrong, you should reach out to both the credit bureau and the company that provided the information (the creditor). Explain what is incorrect and why, and include supporting documentation when possible.
Disputes can be filed with the credit bureaus either online or via mail, the CFPB has great tools to walk you through this process.
Building your credit history
Here are a few more ways to build your credit history:
Pay all of your bills on time—consider setting up AutoPay to help do this
Keeping your accounts open for a long period of time
Keep your balance, or “utilization”, on your credit cards low: either spend 30% or less of your credit limit, or pay off your balance multiple times a month
Review your credit report and dispute any errors or inaccurate information
Rather than opening a large number of credit cards, consider keeping at least one card open for a long period of time
Use products like secured cards or cards designed for credit building
Use a mix of products, including installment loans and credit cards
Myth: I should carry a small balance on my credit card to hit a particular utilization rate
It’s a common misconception that carrying a balance on your credit card improves your score. While low utilization does help, leaving it on your card and incurring interest actually doesn’t.
What you spend on your card (the balance when the statement is generated or at the end of the month) shows on your credit report whether you pay it off in full or carry it from month to month. Paying your balance in full each month is the best financial decision and won’t hurt your score.
If you use your credit card heavily during the month, you may want to consider making multiple payments a month, so your balance is always low no matter when credit bureaus check your score.
Myth: I should take out a loan to improve my credit, even if I don't need one
While having diverse types of credit can improve your credit score, taking a loan that you don’t need isn’t a good financial decision. It is not recommended to borrow when you don’t need to.
Beyond these myths, there’s so much more to learn about credit. As part of our commitment to our customers’ financial wellbeing, this financial literacy series will break down these topics. Our mission at Possible is to help you end the debt trap and unlock economic mobility for good. 🟦
