Fixing Up Your Credit Report: Understanding Why a Credit Report Is Important

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Many people used to put their credit reports in the same category as IQ results, SAT scores, school report cards, job reviews, and cholesterol readings — in other words, information that's important only when a particular situation arises. As soon as the situation goes away, so does the need to monitor it. Sort of like a diet. Once your belt stops cutting off your circulation, you can stop counting your calories. Right? Wrong! The same applies to watching your credit report and keeping track of your score periodically.

Today, with tightening credit, a larger-than-usual need to refinance a home by a larger-than-usual percentage of the population, and credit card debt at very high levels, your credit report and score have moved to center stage. And that doesn't begin to touch on the other problems that a low score or negative credit file can exacerbate. Insurance rates are rising and home-owner's insurance is getting not only expensive but, in some places near the water, also hard to find. The information in your credit report and score can make an important difference here as well. In this chapter, we explain why you need to be on frequent and intimate terms with your credit report.

Your credit report doesn't come into play just when you want to borrow money. A bad credit report may affect what you pay for insurance, whether you can rent the apartment of your choice, or whether you'll be hired for certain jobs. A particularly finance-conscious romantic prospect may even nix you for a bad credit history!

Your credit score can cost you thousands of dollars and deny you opportunities you never even knew you missed. Clearly, what you don't know can hurt you. Consider two hypothetical life situations to illustrate this point:

• Say you signed up for a dating service. Now, what if all the information available to your prospective dates is given to them by people you've dated in the past? What if the quality of the dates you get in the future is directly tied to what all the people you've dumped (or been dumped by) say about you? Starting to sweat a little?
• Say you're applying for a job. Your salary, your job title, and the size of your office will be tied directly to what's on your résumé. But what if your past employers wrote your résumé,— and mixed up your personnel file with the file of someone else who was fired for sexual harassment? Can you imagine walking into that job interview without any idea of what your former boss reported or whether it was correct?

Meeting your life partner, landing a great job — these situations are ones in which you have a great deal of personal interest in a successful outcome. Kind of like getting a good mortgage rate so you can afford or keep that dream home.

We're not saying that you're guaranteed to like the outcome of your date or job interview — but at least you know it's based on information you're privy to. The same is true with your credit report. You can't rewrite your own credit history, but you can be knowledgeable about what a credit report is and how much weight it carries as you try to negotiate your way through the financial universe. You can be savvy about situations that could cost you thousands of dollars more or deny you opportunities. And you can catch inaccuracies on your report (a common situation) and correct them.

You have no excuse for not knowing what's in your credit report. Getting a current copy of your credit report from each of the three credit bureaus (Equifax, Experian, and TransUnion) is easy. And don't even think about saying that you can't afford it, because you can now request your credit report from each credit bureau once a year for free.

So what's in your report? Is the information correct — or even yours? And if not, what can you do to fix it? Settle in for some facts that will open your eyes and save you money, time, and frustration.

This article was authored by Ted Benna, Stephen R. Bucci, James P. Caher, John M. Caher, N. Brian Caverly, Peter Economy, Jack Hungelmann, John E. Lucas, Sarah Glendon Lyons, Margaret A. Munro, Brenda Watson Newmann, Mary Reed, Jordan S. Simon, Kathleen Sindell, Deborah Taylor-Hough, John Ventura.