Every year millions of Americans request their credit reports, yet very few know exactly what to look for. When you receive your credit report, it’s important to also view it from the eyes of employers, lenders, and other financial leaders. Knowing exactly what to look for on your credit report will help you ensure that your financial life is where you want it to be. Whether you have struggled with credit debt or are in a good place, accurately checking your credit report is a responsible practice!

4 Credit Report Considerations

The key to checking your credit report is to focus on accuracy. Since financial documents affect your everyday life, it’s crucial to ensure that everything is right and that anything that’s wrong is immediately fixed. Key elements to watch out for include:

1. Personal Information. Remember, mistakes are not uncommon on credit reports. Human error, similar names, or inadvertent mix-ups can all lead to inaccurate information. Ensure that all of your personal information is accurate, especially if you have any suffixes such as Jr. or Sr. You don’t want to be mixed up with another person on your credit report!
2. Activity. This is the prime time for you to be on the lookout for fraud or identity theft. See any activity you don’t recognize? Then investigate it and report it immediately. Quickly countering errors on your credit report is one of the most crucial strategies to defending your financial reputation.
3. Inquiries. Anytime you look into opening a new credit card or getting insurance, these people are allowed to “inquire” about your credit score. These inquiries should only remain for up to two years before vanishing. If you see any that are over two years old, be sure to follow-up and have the inquiry removed.
4. Public records. Have you ever filed for a bankruptcy? Mortgage modification? Ensure that all of your public records are accurate. Any inaccuracy could be unjustly harming your credit score.

Missing a payment or overwhelming your credit card with charges are obvious ways to hurt your credit score, but there are some surprising credit score factors as well. Whether you’re looking to improve your credit or are trying to safeguard yourself from credit debt, keeping these factors in mind will keep your financial profile safe.

Unexpected Credit Score Factors

Avoiding these purchases or actions could help protect your credit score in the long run. Since every financial situation is different, not every factor may carry the same weight, but these are general truths that borrowers should keep in mind. To safeguard your credit score, avoid:

1. Applying for a department store card. Keep in mind that department stores have higher interest rates than most borrowers. Furthermore, when you apply for a department store card, a hard inquiry is made. In short, you could lose anywhere from 5 to 35 points on your credit score by simply applying for a department store credit card.

2. Renting a car with a debit card. Many people are tempted to pay with cash or what they have readily available. Paying with a debit card for a major item such as a rental car will certainly ignite a hard inquiry, which will drop your score by a few points.

3. Closing a card with zero balance. You’ve paid off your credit card! Congrats! But wait – it’s not time to close the card just yet. Closing a card with zero balance could offset your credit to available balance ratio, which is a large factor in your credit score. Only close a card when you have little or no outstanding debt. Also keep in mind that older cards can be used as part of your credit history to prove that you were a good borrower.

Even after seeking a loan modification or professional guidance, a home foreclosure sometimes becomes unavoidable. Whether you’re working to avoid a foreclosure or have recently experienced one, it’s important to understand how it impacts your credit score. Unfortunately, credit bureaus are often uncommunicative about exactly how mortgage delinquencies affect credit scores and history, so the damage can blindside some individuals.

What to Expect on Your Credit History

Credit scores can be damaged through a variety of reasons. When it comes to mortgage payments, those variables include:

• Late payments
• Short sales
• Bankruptcy
• Foreclosures

A foreclosure not only has the potential to damage your credit score by 85 to 160 points and in some cases 200-300 points, but also stays on your credit history for at least 7 years. An indirect consequence from a foreclosure that results from these damages is higher interest rates on your home loans, auto loans, and any type of credit payment.

While a foreclosure remains on your credit history for 7 years, there’s the possibility of having it removed once the time has passed. The foreclosure can only be removed if you submit a written request to the three major credit reporting bureaus asking for the event to be removed from your credit history.

The important thing for people who have experienced a foreclosure to remember is that while it can cause temporary hardships, a foreclosure doesn’t have to stain your credit history forever. It’s possible to rebound, especially with the guidance of a credit counselor. Rebuilding credit takes time, so it’s important to learn what you can do now to re-establish your credit history once 7 years has passed from the foreclosure.

When applying for a credit card, it is important to understand the credit score. Failure to understand how scores work can lead to debt negotiation. Understanding the application process is just the first step in an overall healthier attitude towards credit. Knowing how scores work will help you maintain and keep your credit vibrant for the future.

The Score is the Thing

The first step in applying is understanding a few simple ideas in the first place. What’s a credit score? How do scores work? How do I get a good score and avoid a bad one? These are all important questions and knowing the answers to all of them is also key. Knowing what a credit score is and how it works can help you avoid debt and negotiation.

When it comes to credit scores, there are three major bureaus that will issue you a report: TransUnion, Experian and Equifax. None of these bureaus divulge the secret of their process or formula, but they all tend to be around the same amount. The credit score is derived from a variety of factors influencing your credit as well as your finances.

When you check your score, it does not negatively affect your score, but when potential creditors check your score, it can lower your number. Before applying for a credit card, definitely check out your score. You can get a free report from all three bureaus once every 12 months, or after you’ve been declined a credit card or a larger line of credit.

Once you know your score, you can put together the necessary documentation you need to apply for a card. Without understanding how a score is and how it works, an application is just shouting into the wind.

The free annual credit report. You might be surprised to learn that a large percentage of people never even take advantage of this opportunity. Besides being silently unaware of fraud or inaccuracies, not checking your credit report could be holding you back from financial freedom.

Keep An Eye Out

Many people think their credit report is simply a way to monitor their score and look for fraud. While these are both benefits, it is the details of your credit report that are important. The truth is, you may be able to boost your score by looking for a few crucial details in your report.

First, check to make sure all of your accounts are labeled correctly. If you have closed accounts in the past, be sure the status reflects the closed standing and does not refer to the account is open or active. Also, take note of whether the closed accounts are marked as “paid in full” or “satisfied”, and not “settled” or “negotiated”. Even if you have completed a credit negotiation, it is important that you arrange to have your creditor report your account as “satisfied” to avoid a drop in credit score.

Next, check the balances of your open and active account. It is important that your reflected balance be accurate, otherwise you could be being penalized for a balance that has since been paid down or to a zero balance. Also, look at the payment history. Late or missed payments are a quick way to drop your score, so be sure to be more timely in the future.

Last, monitor your inquiries. You may find that people have been inquiring about your credit standing without your consent. If this happens, file a dispute with the credit reporting bureau. Also, contact the company who made the inquiry to request that they do not make any further inquiries without your permission.

While you may find it surprising to think that a minor could have credit problems, the truth is that there are many instances in which minors have turned 18 only to find their credit in poor standing. How can this happen? and What can you do to prevent it?

Be Mindful

With the information and technology age comes greater risk for identity theft. The Federal Trade Commission reports that hundreds of minor children become victims of identity theft and credit debt fraud each year. As a parent it is your job to protect your child from such occurrences, here is how:

Protect personal information — children have social security numbers, which means they could be tied to accounts and a line of credit unknowingly. Between receiving mail with your child’s social security number on it and online transactions, their personal information is out there to be used by thieves. It is important to shred information containing your child’s personal information and never give it out to unauthorized personnel.

Monitor credit reports —  just like your own credit history, you need to be keeping an eye of your child’s. You can obtain a free copy once per year of your child’s credit report to be sure there isn’t any unauthorized activity being reported. Monitoring a credit report is the easiest way to become alerted to any fraud or identity theft.

Keep them separate — sometimes parents issue a credit card in their child’s name or put them on as a “user” of the account. This essentially creates joint liability over the debt accumulated on the card. If you were to default a creditor could attempt to collect, even from a minor child. Avoid putting children on your debt accounts or issuing cards in their name until they are of age to be responsible for managing their money and payments towards the card.

Debt relief is something many of us have needed, or will need in the future. While we can’t always avoid problems with financial hardship, we can control how we bounce back after debt problems. Whether you end up “settling” your debts or repaying them through a negotiated agreement, chances are you are going to need to invest time in repairing your credit. Here is how:

Check your credit report – many people underestimate the usefulness of monitoring their credit report. Not only can routine monitoring of your credit report alert you to problems with a debt account, many people find that their report carries inaccurate information. If you were to enter credit negotiations with a lender and you repaid your debts, having this account reported as “settled” rather than “satisfied” could damage your credit. Keep a close eye on your report and make sure that your information is accurate and up to date at all times.

Be a better money manager — it is easy to overspend and forget to save each month, but now is the time you need to really focus on your finances. If you don’t have a budget, set one and stick to it each month. Include a spot in the budget for making payments to a new line of credit, which you will need to obtain to establish a positive credit history. Keep up with all of your payments and make sure you have enough income to cover all of your expenses each month, otherwise you may need to revise your budget.

Get new credit — while this may seem counter intuitive, new credit is exactly what you need to repair your old credit history. You need to write a new chapter that establishes yourself as a responsible borrower capable of making timely payments and maintaining a moderate debt level. Shop around to find a line with the lowest interest rate and fewest fees. Use this line of credit wisely and keep yourself out of default. Keep this line of credit active and open for at least six months before moving into another line of credit.

It might seem like budgeting and your credit have nothing in common, but they do. In fact budgeting and smart money management is a key factor in having good credit.  Here is why:

A Give And Take Relationship

Credit is tricky business and even the smallest mistake can take a devastating toll on your credit standing. While debt is important for creating and maintaining a good credit score, too much debt can be detrimental. People who overspend or carry high credit card balances have a lot of credit debt, which means they are at more of risk for defaulting if financial hardship strikes.

Budgeting is essential for saving money, and saving money is essential for having back up funds in the event of an emergency.  People rarely keep track of their savings, let alone prioritize it. Having an active savings account that is part of your monthly budget of expenses increases your chances of successfully saving money. If you were to lose your job or have unexpected expenses, a savings account can prevent you from missing a debt payment; thereby preventing credit damage.

Your credit is your responsibility, so taking care of it takes effort. Be sure you are budgeting, saving and keeping your debt-to-limit ratio low to make the most of your credit score.

Last week, news broke about several big credit card companies who have been ordered to pay restitution to many customers for charging outlandish fees. Visa and MasterCard are currently involved in a $7.3 billion settlement, while Chase and a few others are involved in a $100 million settlement. While some consumers are aware of the fees associated with their cards, many are not and have ended up in serious credit debt from failure to recognize the consequences.

Finding Fees

Hidden credit card fees are everywhere. Chances are your card has several fees that you may not even be aware of if you haven’t crossed the line into their territory. From over-the-limit fees to fees for paying off balances too quickly or in a lump sum, credit card companies have been sneaky about how they can make extra money. As a consumer it is important that you are fully aware of the fees associated with your cards and be diligent about staying away from their effects.

First, contact your credit card company. They are required by law to provide you with a disclosure statement that will outline the terms and conditions of your card. If you find that some of these conditions are unfavorable try to negotiate. In many cases, credit negotiations focus on such fees and hidden conditions as the main aspect of the negotiation. You may be surprised to learn that you can negotiate down or even eliminate some fees.

Also, stay vigilant about your card and its conditions. Occasionally, you may receive a brochure of credit card terms and conditions in the mail. Do not throw it away, rather read it thoroughly to look for any changes to your accounts. Many people get trapped by subtle changes because they did not bother to read the information provided to them.

If you have recently turned 18 or you’re applying for credit for the first time, then you might be learning that getting a great credit card isn’t easy.  If those offers of credit card reward programs sound enticing, be forewarned that it takes a little bit of time before those cards are available.  However, you can start building up your credit score now, starting small!

First-Time Credit Users

First-time credit users have a few options available for building up a credit score.  Your first option is getting a secured credit card.  Secured cards are for people with no credit history or bad credit history.  Essentially, you put up the money for the card up front and then get to use the card as a credit card.

Your second option is department store-issued or oil company-issued card.  These cards come along with high interest rates, so be very careful to make your payment each month. Otherwise, you’ll be slammed with credit debt – something you definitely don’t want on your fresh credit score!

Your third option is to get an entry-level credit card.  Much like the other two cards, this will have a high interest rate and a low limit, so avoid credit debt and pay off your balance on time and in full.

Once you establish a good credit score (after about a year), you can “graduate” to a better card with more perks.  However, start small and start responsibly, and you’ll be well on your way to getting cash-back and free airline miles galore!