Your Free Credit Report and What It Means To You

If you are one of the millions of Americans struggling with debt, you know the power of credit ? especially when it is absent. There is no clearer indication of the role that credit plays in your life than when you no longer have access to it. Our society has largely become one of credit; you cannot even get a hotel room without a credit card today. Even employers are beginning to use credit reports in their efforts to hire the best employees. If you find yourself in this position, then getting a copy of your free credit report is the very first thing that you should do.

How can getting your free credit report help you better your current situation? You will find that with this tool in hand, you can do many different things. However, you should first do two things ? check for signs of identity theft and erroneous information, as well as decide how you will repay those creditors lined up across your credit report. This might sound confusing, but when you understand how to use your credit report, things become much more clear. How do you use it? Where do you get it? What does it say about you? Let's look at the last question first.

When you obtain your free credit report, you will see what creditors, lenders and employers do. In many ways, your credit report is a summary of you, at least of your financial life. However, many people feel that your financial life is an excellent indication of how you live the rest of your life. For instance, employers use credit reports during the hiring process because they feel that consumers with good credit ratings take their obligations and responsibilities more seriously than do those with bad credit. This is just one way that poor decisions and erroneous information can bite you even years down the road.

Where do you get a copy of your free credit report? You are actually guaranteed a free credit report once per year from each major credit bureau ? Experian, Equifax and TransUnion. It is highly recommended that you obtain a copy from each, because they can contain different information. While they are all records of your financial life, they can differ greatly in the items they contain. Therefore, get a copy from each credit bureau and read each item line by line.

Your free credit report will be broken down into sections, but the section of most importance to you will be the one listing open accounts and the one listing delinquent accounts (not always the same). Take a long look at these accounts ? you might find open accounts that you did not authorize. You might also find accounts listed as delinquent that you paid off. These items can be disputed with the credit bureau and removed from your credit report. This will immediately increase your credit score and give you back some of your purchasing power.

You should also look at the number of inquiries listed on your free credit report. A high number of inquiries that you did not initiate could mean attempted identity theft. In addition, the more inquiries there are, the lower your credit score will be. Credit is a powerful tool, but it can easily be reduced with just a few inquiries. Have these items removed by the credit bureau if they were not initiated by you.

Next, your free credit report will give you an idea of what your credit score is. You will not see your actual FICO score (unless you pay extra), but you can begin to develop an idea of where you stand. Remember that a perfect score of 700 is almost unattainable, except by those who do not need their credit. For those that do use their credit, perfect is a bit lower. In addition, do not expect to have a good score if you have any bad debts on your credit report.

In order to improve your credit score and bring your free credit report up to a respectable area, you will need to begin dealing with the creditors on your report. As a note, if a debt has been sold to a collections agency, the debt may be reported twice. You can pay off the collections agency, but you cannot repay the original creditor, who has charged off your debt. This line item will remain until it falls off your free credit report (anywhere between 3 and 10 years). Obviously, it is immensely important that you pay off your creditors prior to your debt being sold to a collections agency. You can get a copy of your free credit report online, or you can call each credit bureau independently or even mail a request for your credit report ? however, online options are faster and more convenient and will help you get your credit back in shape more quickly.