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Using Your Credit Report

Getting access to your credit report is easier than ever. You've always had a right to get a credit report when a potential creditor turned you down for an account. However, the Fair and Accurate Credit Transactions Act gives everyone a right to get a free credit report from each of the three major credit reporting companies once each year. With just a little effort, you can keep apprised of your credit situation on a regular basis.

Once you have your credit report in your hands, however, you need to be able to understand it and to know where to look for signs of mistakes and potential fraud. Although each credit reporting company uses a different reporting format, they each contain the same basic information.

What you'll see
When you look at your credit report, you'll see several different types of information. Your credit report includes personal information about you, including your name, date of birth, current address, and employer. If you have used a different name in the past or if you use slight variations on your name on different accounts, then they will be listed on the report. Also, you may find former addresses or employers listed on the report.

You'll then see a summary of your credit history. Some summaries just give you the total number of credit accounts you have, while others break them down by the type of loan you have. For instance, you can see how many mortgage loans, credit cards, or fixed installment loans such as car loans you have. In addition, you may see a breakdown of how many of the accounts listed on your credit report are currently open, as well as whether or not you have any accounts that are currently past due or for which a creditor has reported negative information.

After the summary, you can look at more detailed information about each of your credit accounts. Each line item includes some of the terms of your loan or borrowing arrangement with your creditor, including the name of the financial institution, the current account balance, and whether or not you are current on your payments. Each account listing will also include information about your payment history; if you have been late on payments in the past, for instance, then the report will tell you when late payments occurred and how far behind you got on your loan before bringing it current. The credit reporting companies use different formats and codes to reflect late payments. Depending on the report, you may see colored graphics that clearly indicate payment problems, or you may simply see a list of codes that you'll need to decipher. Some reports also give you information about the amount of your monthly balances or payments on your accounts.

Your credit report also includes references to your credit in public records. Some events that will trigger listings in the public records section include bankruptcy filings, tax liens, or court judgments resulting from civil lawsuits. Also, mortgage foreclosures, wage garnishments, and other actions that require court involvement may appear on your credit report.

Finally, you will find a listing of creditors that have looked at your credit report in the recent past. It's likely that you'll see not only your current financial institutions but also others that want to encourage you to obtain credit from them, as well as utility companies. If you receive credit card offers from companies like Citigroup (NYSE: C  ) or American Express (NYSE: AXP  ) , you'll probably see them listed among those who have requested access to your credit information.

Finding important mistakes
With the wealth of information included on your credit report, the odds are fairly good that you'll find at least a few errors. For example, when I pulled up my credit report, I found that the report failed to list my more recent employers and misspelled the name of the employer it did include. Also, some of my previous addresses were incorrect. However, some pieces of information on your credit report are more important than others.

In reviewing your personal information, you should make sure that the credit reporting company has your current address and contact information correct. If your address is incorrect, then new credit offers in your name may be sent to the wrong place, opening the door for someone to steal your identity. Contacting the credit reporting company to report your new address is simple.

Disputing an erroneous negative credit item is more complicated. However, because your credit history is so important to your financial life, it's usually worth it to take the time to correct all but the most trivial of errors. Providing supporting information to the credit reporting agency, including receipts, correspondence, and other documentation, can make it easier to complete its investigation and fix mistakes more quickly.

Tying up loose ends
You should also look closely on your credit report for accounts that you no longer use but are still listed as open. For instance, a number of retail stores offer discounts to people who apply for a store credit card. Some people apply just to get the discount and never think about the card again. If you have a credit account you no longer need, it usually makes sense to close it in order to avoid having it fall into the hands of a thief.

When you first see your full credit report, it can look intimidating and may seem hard to understand. With a little effort, however, you can decipher the report and make sure that all of its information is correct. Given how important credit is in your financial life, it's worth the time and effort to take a close look at your credit information.

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Motley Fool GreenLight can make managing your credit easier. Our personal finance newsletter provides helpful commentary and analysis of issues that affect your finances, and you'll find tips that can help reduce expenses and increase income. Give it a try risk-free for 30 days.

Fool contributor Dan Caplinger was lucky enough not to find any major mistakes on his credit report -- so far. He doesn't own shares of any of the companies mentioned in this article. The Fool's disclosure policy gets extra credit.


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Dan Caplinger
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Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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