It is a written report, (stored in computers) comprised of the following information about your personal credit worthiness and debt repayment history.

• Identification by name, addresses, spouse's name, date of birth, Social Security number, telephone number, place of employment, mothers maiden name etc.
  
• Credit Inquiries - every time a subscriber (credit provider) runs a credit report on a consumer, a record of the file inquiry is made. It will remain on the file in most states for one or two years. This is of interest to creditors because it reveals recent credit activity.
  
• Information in public records and collection accounts are also collected by (or reported) to these agencies. Public records include courthouse records, bankruptcies, judgments, lawsuits, criminal etc.
  
• Credit History - which includes the name and ID number of each subscriber who makes a report and your credit/debt repayment history. Also included is the date an account was opened, credit limits, current balance, monthly payment amount and payment frequency for the last 12-24 months. Records are dated with each request or entry. Other information includes, but is not limited to, consumer disputes, criminal convictions, individual liability or joint liability of accounts, co-maker or guarantor of payment on a certain account, secured accounts and charge offs -when a creditor has reported an unpaid balance as a loss.
  
• Consumer Statements - a statement - not to exceed 100 words - regarding any account(s) an individual may wish to more accurately and completely explain - often very helpful to credit decisions. When is a credit file created? Usually when you make application for a loan or credit card, or when a party who extended credit makes a report to their credit reporting service on your debt repayment.
  

Credit reporting agency subscribers comprised of banks and merchants etc., may not access an individual's credit record unless authorized. This authorization is standard procedure when you sign credit and loan applications, life insurance applications, employment applications, security clearance requests , etc. Read the fine print on the applications for more details.

If you are actively using credit - using one or more credit cards with monthly or bimonthly charge activity, have installment loan(s), vehicle lease, etc. review your credit file every nine to twelve months, otherwise once every 15 months is adequate.

How To Obtain A Copy Of Your Credit File

What is a Credit Reporting Agency? It's an organization, usually profit-driven, devoted to collecting and reporting credit information to subscribers - mostly area businesses, banks, etc. Think of it as a clearinghouse for information about your personal credit history and debt repayment practices. The major firms cover all fifty states. These agencies are highly computerized and have millions of files and millions of subscribers -mostly businesses - paying a monthly fee for this information reporting service. All bureaus DO NOT contain the same data or necessarily all of your credit history.

What is a Credit Bureau? It's a smaller version of a credit reporting agency. Credit Bureaus usually operate within a single state and often cover only one county. Others cover a multi-county area. Some also offer collection services in addition to background reports for potential employers etc.

What is a credit rating and where does it come from? It is the rating given to an individual or business - by a previous lender - as a credit risk, based on past records of debt repayment, financial statements, employment and current financial status. Credit reporting agencies do not rate your credit, only those merchants who extend credit (to you) do the rating.

How do I locate credit bureaus and credit reporting agencies in my area? First check the yellow pages of a local telephone book under Credit Reporting Agencies. If there is more than one listed, chances are you have more than one credit file.

How do I obtain a copy of my credit file from each agency? By law you are entitled to one free copy per year from each three major credit bureaus, Equifax, Experian and Trans Union.

NOTE: Anyone denied credit based on information contained in a credit file must be notified according to the Fair Credit Reporting Act. The company which denied you credit will tell you from what agency they obtained your credit report and how you can obtain a copy - free of charge if you request one within a reasonable time after receiving the denial letter. Send a copy of the denial letter with the request.

What is the next step? In about ten days after you request it, your credit file's will come by return mail. It will include instructions on how to read it and it will contain an explanation of all the symbols and abbreviations used in the report.

To receive a free copy of your credit report, contact any of the three national credit bureaus listed below. By law, you are entitled to one free copy from each of the 3 national credit bureaus per year. If you want to get your credit score as well, there will be a charge.

Experian (formerly TRW)
http://www.experian.com
PO Box 2002
Allen, TX 75013-2002
888-397-3742

Equifax (formerly TRW)
http://www.equifax.com
PO Box 105873
800-685-1111

Trans Union
http://www.transunion.com
Consumer Relations Center
2 Baldwin Place
PO Box 1000
Chester, PA 19022

The three national credit bureaus offer a toll-free number enabling consumers to "opt out" of pre approved credit offers with just one phone call. 1-888-5-OPTOUT (888-567-8688).

When you look at your credit scores and your credit report do you assume it is correct? Do you also think that your credit score is the same with each of the three major credit reporting agencies? Think again,” said Paul Richard, a registered financial consultant (RFC) and executive director of the nonprofit Institute of Consumer Financial Education (ICFE), a San Diego based nonprofit group helping people correct credit file mistakes and also improve their spending habits, increase their savings and use credit more wisely.

According to a joint report issued by the Consumer Federation of America (CFA) and the National Credit Reporting Association (NCRA); "Millions of Americans are put in jeopardy by inaccurate credit scores and they may have to pay more - or worse, be denied for credit, utilities or insurance because of inaccurate credit scores."

Research for the study, conducted during the summer of 2002, analyzed the credit scores of more than 500,000 consumers, and extensively reviewed the files of more than 1,700 individuals, maintained by the three major credit repositories - Equifax, Experian, and Trans Union. Nearly 200 million Americans have credit files. The analysis of the scores in 502,623 merged credit files reveals that 29 percent of these consumers had scores with a range of at least 50 points, while four percent of the consumers had score ranges of at least 100 points. The average range of the three scores was 41 points, and the median range was 35 points. Credit scores range from approximately 400 to 850," the joint CFA-NCRA report said.

"The analysis of credit files for consistencies and inconsistencies revealed reasons for these differences in scores. Common errors of omission were the failure to report a negative event - (a delinquency or charge off) - or a positive event - (payments on an account). 78 percent of files were missing a revolving account in good standing while one-third (33 percent) of files were missing a mortgage account that had never been late. More serious errors of commission appeared in a significant portion of files. In 43 percent of the files, reports on the same accounts conflicted in regard to how often consumers had been late by 30 days. In 29 percent of the files, there was conflicting information about how many times the consumer had been 60 days late. And in 24 percent of the files, conflicts existed about 90-day delinquencies. Reported delinquencies have a large effect on credit scores," the report also revealed.

"While the sample of 51 is too small to generalize reliably to all credit files, the frequency of errors in these files strongly suggests that errors of omission and commission exist in the credit files of millions of consumers," said Terry W. Clemans, NCRA Executive Director.

Consumers, and especially first-time home buyers, shopping for a mortgage may have the greatest risk, according to the study, because a score of 680 - 720 is necessary to qualify for a prime loan at conventional rates. Consumers with lowers scores will be charged more or denied. Falling below the 680 cutoff point can impose significant costs on mortgage borrowers. Over the life of a 30-year, $150,000 mortgage, for example, a borrower incorrectly charged a sub-prime rate of 9.84 percent instead of a prime rate of 6.56 percent would pay $317,517 in interest instead of only $193,450 in interest - a difference of $124,067 in interest payments, according to the study’s conclusions.

People can reduce the negative affects of mistakes in their credit files and the variance of credit scores by checking their credit reports at least once a year. Active credit seekers and users should probably check their reports every six months,” says the ICFE, which makes free ‘Credit File Request Forms’ available on its Web site. “If you are denied credit or told you may be a bad credit risk, ask for more details, so you will know what to look for when you check your reports. If you are denied credit, you are entitled to a free copy of your credit report,” the ICFE said.

Improving your credit score takes time and there is no quick fix to the situation. The best thing to do is to properly manage your credit responsibly over time.

Here are some suggestions that could help in improving your credit score:

You should try to pay your bills on time as late payments and collections can have a negative impact on your score.

Pay balances down as this will help in reducing your debt to income ratio. Also try to keep your balances within 50% of the credit limit as this can help to increase your score.

Try to get current and stay current with missed payments, as the longer you pay your bills on time, the more your score will increase.

Avoid taking on any new debt as all the new inquiries will appear on your credit report along with any new debt. In both instances it can decrease your score.

Fair Isaac and Company list these examples of ways to increase and decrease a FICO score:

How to increase your FICO score:

By paying your bills on time for 6 months you could raise your FICO almost 20 points.

By paying down the balances on your credit cards by 34% you could raise your FICO score almost 20 points.

How to decrease your FICO score:

By missing the due date on your credit card monthly payments you could decrease your FICO score between 75 to 125 points.

Credit cards that are maxed out to the limit could decrease your FICO score between 20 to 70 points.

Sample Dispute Letter

Date

Your Name
Your Address
Your City, State, Zip Code

Complaint Department
Name of Credit Reporting Agency
City, State, Zip Code

To whom it may concern:

I am writing this letter to dispute the following information in my file. The items I am disputing are also encircled on the attached copy of the report I received. (Identify item(s) disputed by name of source, such as creditors or tax court, and identify type of item, such as credit account, judgment, etc.)

This item is (inaccurate or incomplete) because (describe what is inaccurate or incomplete and why). I am requesting that the item be deleted (or request another specific change) to correct the information.

Enclosed are copies of (use this sentence if applicable and describe any enclosed documentation, such as payment records, court documents) supporting my position. Please reinvestigate this (these) matter(s) and (delete or correct) the disputed item(s) as soon as possible.

Sincerely,
Your name

Enclosures: (List what you are enclosing)