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Know facts about credit reports

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Sunday, October 5, 2014

Given the importance of your credit report and credit score it is important to know a little bit about each.

Banks, finance companies, insurance companies, and even employers look at your credit report and your credit score. Your score is derived from information gathered from your credit reports. Your credit report is literally a report from one of the credit bureaus or reporting agencies with financial and demographic information about you.

Although there are several reporting agencies, the three largest and most used are Equifax, Experian, and Transunion. Information that is gathered for your credit reports come from credit and banking agencies voluntarily reporting information about you and your credit habits to one or more of these agencies.

In addition, some public record information about you is collected such as any judgments or liens.

Credit reports are like report cards about your financial life. Your name, address, and Social Security number are all collected, in addition to information about your loan amounts, your payment history including on-time and late payments, and when your accounts were opened.

Other companies or agencies, such as the utility company or the IRS, may report information about you, particularly if you fall behind on your payments.

Your three credit reports may look somewhat different from each other. This is because the reporting of your information is technically voluntary as not all companies report to all three major credit bureaus.

It is important that you check all three credit reports at least once per year to make sure the information is up to date and correct.

You can get access to each report for free once per year by going to www.annualcreditreport.com. This is the only source for your free credit reports as authorized by federal law.

In addition, anytime you are denied credit due to information gathered from a credit report, you have the right to see your credit report to ensure that it is accurate. Interestingly you can get free access to your credit reports, but not your credit score. If you want to see your actual credit score you have to pay a fee.

Here’s a consumer alert. Although numerous commercials advertise access to free credit reports or free credit scores, the only way to get the reports for free is through the annual credit report website (www.annualcreditreport.com).

The advertisements by any other site or entity are for credit monitoring services to which you pay a monthly or annual fee to use. As part of your payment these sites provide a report or a score for free.

Some credit cards provide your credit score with your monthly statement, but of course you must be one of their customers.

The difference between your credit report and your credit score is a credit report has all the information available about you from a financial perspective. Your credit score is all that information distilled down into a single number based on a formula that is owned by the credit agency.

Len Rhodes is director of technology, information and operations in the College of Business at East Carolina University.                              

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