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You should get your credit reports on a regular basis anyway. But it's most important to get them when you're job hunting or applying for a mortgage, an auto loan or some other major item. There are three credit-reporting agencies and each has a file on you. To make matters worse, the information in these three files can be different. There’s no law that a lender must provide information to all three credit bureaus or even to just one. You really need to get all three of your reports. You can get them free once a year from the three credit reporting bureaus – Experian, Equifax and TransUnion – or at the site www.annualcreditreport.com.
What to look for
When you get your reports you need to look for the following items.
- Accounts that were sent to collection
- Tax liens
- Judgments and lawsuits
- Charge offs
- Bankruptcy and foreclosure
If you find one of these in a credit report, you can bet it's having a negative effect on your credit score and could be a problem with a prospective employer.
If you do find an error
Of course, there's always the possibility that the item is there due to an error. The credit bureaus handle thousands of items a week and mistakes can be made. As you read in a previous paragraph, errors have been found in 20% of all credit reports. If you find one, you need to dispute it by writing a letter to the appropriate credit bureau along with whatever documentation you have that proves your case. Once the bureau receives your letter it is required to contact the company or organization that supplied the information and ask it to verify the item. If the organization cannot verify it or doesn't respond within 30 days, the credit bureau is required by law to remove the item from your credit file. As you might guess, this could result in a nice boost to your credit score.
It’s easier but still not easy
There has been pressure on the credit reporting bureaus to make their reports easier to understand. And they have gotten better. But they’re still not as reader-friendly as, say, Sports Illustrated or Cosmopolitan. If you find you have a problem understanding your reports, you might ask a friend or relative for help. You could go to one of the credit counseling agencies mentioned previously and have a counselor explain things to you or you could watch this video to learn more about understanding credit reports.