By Erica Wennell, Commercial Lender with Customers Bank and Board Member of My Gut Instinct
Credit reports and credit scores can be an intimidating thing to face. Having worked in the banking industry for 12 years I’ve met with many people who were scared of their credit report. If you’re feeling anxious about your credit report or credit score, don’t be we all have one. Credit scores are one of the few things in life that YOU have complete control over. The very first step is to get a copy of your credit report. Annualcreditreport.com is the only place where you can get a free copy of your credit report. There are 3 different credit bureaus and everyone is entitled to a free copy of one from each bureau once a year. I’d suggest staggering them throughout the year. There is no reason to pull all three at once. Likely they will all contain the same information. This will report will not contain your credit score just your credit report. This is the data that drives the score up and down. A lot of people get really hung up on what their score is, when is what’s in the body of the report that’s the most important.
Now that you have your credit report in front of you look at it line by line. Each line of financial accounts or trade lines will tell you who you owe the debt to, how much you owe them, what is the monthly payment, and when this debt was established. It will also show if there have been any late payments. I would suggest getting a highlighter out and marking anything up on the report that doesn’t match with what you know to be your debt. If you don’t understand something on the credit report take it into your bank and ask someone to go over it with you. Don’t feel embarrassed about what is on the report. Bankers are here to help you with your financial health. We want you to have a better credit score so you qualify for a lower rate on a loan or get that house you’ve been dreaming of. We are here to help you.
What type of debit is and isn’t on a credit report? In the simplest of terms any company whom you have taken a loan out with and are paying interest on will be reported on the credit report. A few examples of debts that are on the credit report are mortgages, credit cards, auto loans, and installment loans. Examples of items that are not reported to the credit bureau are rent payments, utilities bills, hospital bills, and cell phone bills. If you owe any company a debt and default on it, it’ll likely be sold to a collection agency, and the collection agency will then place it on the credit report as an account in collections.
The biggest question most bankers get is what can I do to improve my credit score? Tip number one; don’t let debts get to the point where they are in collections. Stay on top of who you owe money to and when you owe it to them. If you’re struggling to make payments be proactive and reach out to the company to set up payment arrangements. Another major factor in your credit score is how much revolving credit you have versus how much you’re actually using. The smaller that percentage is, the better it is for your credit rating. Leave old in good standing debts on your credit report. The longer your history of good debts is the better it is for your score.
This month I challenge you to get a copy of your credit report and review it. If there are items in collections or past due try tackling one item at a time. Don’t get overwhelmed, while it can seem daunting to turn around a negative report it can be done. It just takes a little time, perseverance, and sometimes several phone calls. Often times debt collectors will take less than the full amount that’s owed or will work out a payment plan. The “The Total Money Makeover” By Dave Ramsey is a great book no matter where you are in your financial life.