Getting the Proper Credit

Lewis Schiff

Question of the week:
My brother-in-law orders a copy of his credit report every single year, but I've never even seen mine. Does it really matter all that much? --Dianne T.

Dear Dianne,

It's a good idea to periodically check on the accuracy of your credit reports. This is especially important if you're considering a major purchase, like a home or a car. Checking in advance on the accuracy of your information could speed the credit-granting process.

When we asked members of the Armchair Millionaire community about checking their reports, we heard a range of good reasons for checking your credit. Here are some examples:

"I check mine every two years and look for obvious errors. This is also a good time to close those accounts that are still open that you do not use anymore." --Paul K.

"We routinely find minimal mistakes on our credit reports, like wrong addresses or incorrect employers. We've even found incorrect account information or loans which were still being reported as open, even though they were actually paid in full and closed." --Jennifer G.

"I was a victim of credit fraud years ago. I have checked my report from all three bureaus on a regular basis ever since." --Jose R.

Since you've never obtained your credit report before, my guide provides you the basics on how to get it and what you'll find on it.

The Armchair Millionaire Guide to Credit Reports

• Getting your report. You can order a copy of your report through the Web sites of each of the three major credit reporting agencies:
  o Equifax (www.equifax.com)
  o Experian (www.experian.com)
  o TransUnion (www.transunion.com)
  Since more than one agency may have a file on you, with different information, you may want to contact each one. In most cases, you'll pay $9.00 per report, although depending on situation, the report may cost slightly less, or even be free
  
  
• What's on your report. There are four kinds of information:
  o Identifying information. This means your name, current and previous addresses, Social Security number, year of birth, employment history and income, and home ownership.
  o Credit information. This is your record of paying back loans and credit cards. It includes the date you opened each account, your credit limit or loan amount, balance, monthly payments and payment record over the past several years. If you've had an overdue account referred to a collection agency, that would be included here, as well.
  o Public record information. This includes bankruptcies, tax liens judgments, and any other information available from public records.
  o Inquiries. These are the names of those who have requested a copy of your credit report.
  
  
• Where the information comes from. It comes from a wide variety of sources: banks, credit card companies, mortgage and finance companies, credit unions, commercial lenders, and department stores, local merchants, landlords, insurance companies, utilities, hospitals, doctors, lawyers and other professionals. It is also gathered from the public records of municipal, state and federal agencies, land record offices and other government agencies.
  
  
• Who gets to see it. The Fair Credit Reporting Act sets the rules about who has access to your report. It's generally limited to people you have initiated business with, such as landlords, lenders and credit card companies, who have a "permissible reason" to see your report. Employers and prospective employers can also see it, provided you've given them written permission to do so.

THE BOTTOM LINE: Because your credit file changes constantly, it's important to review it from time to time to check that it's correct. This is a basic financial housekeeping chore that everyone should take care of on a regular basis.

From "Ask the Armchair Millionaire" featured each week on CNNMoney

For more Lewis Schiff articles and resources, click here.

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