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Understanding Your Credit Report – A Quick Guide

If you want to borrow money or get a mortgage, checking your credit report is the first, most important step. A credit report measures your creditworthiness and has a great influence on the terms under which you can get the loan. The better the report, the more favorable the interests are going to be, just to give an example.

Many people don’t know that the Fair Credit Reporting Act gives them the right to check their credit reports for free at any time. All the three major credit reporting agencies (Experian, TransUnion, and Equifax) must provide you with a free report at least once per year. You just need to ask.

What is a credit report?

The first thing you need to understand is that a credit report is not the same thing as a credit score. A credit report is the only source of information that banks and financial institutes use to calculate your credit score. It is a compilation of data about how you handled your previous debts and credit, such as how you pay your bills and how much money you earn. It also includes all those events that pertain to your credit history such as foreclosures, loans, and lawsuits that may have been filed against you.

Ultimately, a credit report is used to establish how high your credit score (such as a FICO score) is. If your credit report is full of positive information, your credit score will be high. If this info is negative, your score will be low. 

Reading and fixing your credit report

Reading your credit report thoroughly is vital to check whether it includes any mistake. It is not so infrequent, in fact, to find that a credit report is full of inaccuracies and errors. These mistakes, however, may severely harm your life by ruining your chances to get a loan, insurance, a new job or purchase a home.

If you find any incorrect information, filing a lawsuit may be your only chance to fix your report. Although credit reporting bureaus are required to investigate your dispute, things are seldom this simple. An experienced attorney will help you dispute the investigation, deal with the post-investigation phase, and ultimately clear your report from any mistake.

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