It’s all done by computers; but even so, to be turned down for a credit card or a loan can feel like a very personal insult. The most likely reason is that you have a poor credit rating. You don’t have to get mad, you can get even—not by acts of revenge against the credit rating bureau, but by understanding how the system works and what you can do to make it work better for you.
What’s On My Record?
Your credit rating is held by three credit bureaus—Equifax, Experian, and Trans Union. Most of the information is the same across the three bureaus.
Whenever you apply for a new source of credit, the lender will check your rating. When you enter the credit agreement, they should also report your progress in repaying it.
Regular repayments of credit will result in a healthy score.
Failures in repayment will damage your score. It will also be damaged by every application for credit which is refused, so it can be something of a vicious circle.
How Can I Check My Record?
Each of the bureaus is required by law to provide you with one free copy of your report per year. You can obtain these online. It is quite a good idea to stagger the applications so that you get one every four months.
The information is quite complicated, but you should be able to spot any black marks that you do not recognize. Most negative information on the record should be removed after 7 years, while positive information should be kept for at least 10 years.
Identity theft is a growing problem, and someone may have used your identity to obtain a loan on which they have defaulted.
How Can I Change My Record?
If you spot any false negatives in your report, you must apply to the lender (not the bureau) to have them removed. If this is an error that you can show paperwork for, it can usually be rectified quite quickly. Some errors can take longer, especially if there is identity theft involved.
Over the long term, you can improve your rating by increasing the positive reports. Not using credit at all will not help, so take out appropriate credit and repay it on a tight schedule. Reporting by lenders is voluntary, so make sure that your lender will report positively.
Both checking your report and changing it can be time-consuming and complicated. There are agencies that will do it all for you, and software programs that will take much of the legwork out of the task. You can find out here about some of the leading software available.
Good Habits Pay Off
Although everyone faces the risk of identity theft and fraud, maintaining a good credit report is largely a matter of good habits, both by being careful about sticking to the terms of credit and by keeping a regular check on your reports. If the worst comes to the worst, don’t panic and set about putting things right.
Summer Griffiths is a Mom who takes care of the family finances in her household. She enjoys balancing the books and writes about personal finance in her articles.