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Consumer Guide to Credit Reports – Part 2

Last time we talked about how credit reports are used. It’s logical to discuss why it’s important to periodically review your credit report. Here are three important reasons why you should pull a credit report at least once a year.

Knowledge is Power

American consumers have the right under Federal Law to request and pull three (3) credit reports per year from each of the three major credit reporting agencies: Experian, TransUnion, and Equifax. Consumers can get them all at once, or at varied times throughout the year.  We suggest you request their credit reports roughly every four months, unless “extraordinary circumstances” arise, such as fraud or identity theft.  We’ve found that individuals who periodically review their credit reports have better understanding of their financial position.

Credit Report Accuracy Counts

Don’t assume the information contained on your report is accurate. It’s very common for errors to appear or incorrect information sent to a credit bureau. Unfortunately the burden is on the the consumer to contest any information that is inaccurate. Unless you follow up to contest the incorrect credit report information within a prescribed time period, the information will be deemed valid. It essentially means that you will be “on the hook” for any loan payments and any negative information will stick.

Another key reason to have an accurate report is when you apply for credit. As you know, lenders use credit reports as the benchmark in determining your creditworthiness. They’ll use this as a basis for the contractual terms they’ll extend. The last thing you want is to deal with credit errors when negotiating for a new car or house. Other than the hassle factor, it can cost you in terms on the interest rate you receive. Or worse, a denial of your credit application. So, having an accurate credit report — one that actually reflects your borrowing and repayment history — affects how much you’ll pay for a mortgage, car loan, credit card or any other kind of debt.

A Learning Opportunity

In addition taking the necessary steps to your credit report is accurate, it’s also a way to look at your financial health. A credit report can shed light on your spending habits and overall accountability. Your report provide feedback — in black and white — how you’re managing debt.  Without knowing where you are, how can you make improvements? Before helping my clients file for bankruptcy I encourage them to look at the behaviors and circumstances leading up to it.

Now that we’ve established why an accurate report is key, the next step is to learn how to read it.

About Sean Hanley

Practicing law since 2007, Sean specializes in the ever-changing laws related to real estate, business and estate planning. Embracing technology with a focus on personalized service, he understands the challenges of living and thriving in Silicon Valley. Tapping into his education in economics and business administration, Sean also serves on the non-profit Willow Glen Business Association.

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