How to understand your credit report and recognize inaccuracies

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Each year, Americans are entitled to view one credit report from each of the three major...

Each year, Americans are entitled to view one credit report from each of the three major credit-reporting agencies. Even if you suspect your credit is stable, it's always a good idea to check your report for any inaccuracies or signs of identity theft. Use these guidelines to make the best of your report, understand its content and contest any inaccuracies.

Pull more than one credit report

The three major credit-reporting agencies in the United States are Experian, TransUnion and Equifax. You are allowed to see a credit report from each of these agencies once a year. Because each agency generates a slightly different report, it is important to pull your credit history from each one to compare and contrast them.

Identify the report's sections

Your credit report contains more information than just your credit history. Don't just glance over the basics - your address, name and employment history all need to be up-to-date. If anything is inaccurate, contact the reporting agency to request changes.

Be aware of the format of each agency's report

These reporting agencies generate their own individual reports, so they vary in style. You can find samples on each agency's website, as well as information on how to read the report. Typically, these reports will break problematic credit accounts into a category called "potentially negative items." Such items might include details such as "60 days past due," to describe the nature of the negative credit item.

Know how your history is weighed

Five items comprise your credit score, with more importance placed on some items than others. Your payment history, which includes the timeliness of your payments, accounts for 35 percent of your score; total amount you owe is 30 percent; the total length of your credit history is worth 15 percent; new credit accounts and inquiries are 10 percent; and the types of credit in use - such as mortgages, credit cars and auto loans - count for 10 percent of your credit score.

Question inaccurate information immediately

If you find any inaccuracies in your credit report, contact the reporting agency that supplied the report and the creditor or other agency that furnished the information. Experian, Equifax and TransUnion each have online dispute formats that are easy to use. Your report will also come with information on how to call or mail in a dispute. If you suspect identify theft, you should also create an identity theft report with the Federal Trade Commission, in addition to contacting your creditors and the reporting agencies.

Keeping up-to-date with your credit history is critical for applying for mortgages, auto loans or a credit line increase. Knowing how your credit score is calculated can also help you make better credit choices in the future. If you need more specific guidance on how to improve your own financial situation or get out of debt, consider finding an Atlanta area financial advisor.

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