Personal Money Management

Your personal credit report is a factual record of your credit payment history. It's provided to companies and individuals by credit bureaus for purposes permitted by law, usually to grant you credit. The main purpose of a credit report is to help a credit grantor decide whether to grant you credit based upon your credit payment history. A credit report is a report generated from your credit file (a database maintained by a credit bureau containing your credit history).

More than 190 million people in the United States have a credit card, car loan, mortgage or student loan. Almost every one of them has a credit profile. The information in your credit file is obtained directly from the companies you have credit with, as well as from government agencies such as the legal court systems. Credit reports are provided by following credit bureaus: Experian, Equifax, Trans Union.

When a lender is assessing your report for credit of any kind, your personal risk score, also called a personal credit score, is considered. This is a snapshot of your personal credit risk — a statistical summary of the individual pieces of information on your credit report. The score predicts how likely it is that you repay its debts.

Credit scoring is used as an objective way to determine the risk that you won't repay the loan. That risk helps determine whether or not you'll receive the loan and also what interest rate you'll be charged.

Although many lenders use their own credit scoring systems, the majority use a scoring system called FICO, developed by Fair, Isaac & Company. To develop scoring systems, analysts review hundreds of thousands of credit reports over a period of at least two years to develop risk profiles. Past payment performance, credit use and credit history weigh most heavily in the credit scoring process. For example, a person using 75 percent of its available credit represents a greater risk than a company using just 25 percent.

In the event that you wish to dispute the information filed on your credit report, according to the law, both the credit reporting agency (CRA) and the organization that provided the information to the CRA, such as a bank or credit card company, have responsibilities for correcting inaccurate or incomplete information in your report. To protect all your rights under the law, contact both the CRA and the information provider if you have a dispute.

First, tell the CRA in writing the information you believe to be inaccurate. Include copies (not originals) of documents that support your position. In addition to providing your complete name and address, your letter should clearly identify each item in your report you dispute, state the facts and explain why you dispute the information, and request deletion or correction. You may want to enclose a copy of your report with the items in question circled. Send your detailed letter by certified mail, return receipt requested, so you can document what the CRA received. Keep copies of your dispute letter and enclosures. By following the step-by-step instructions below you will be certain to follow dispute procedures to the letter which will ensure the best possible resolution.

Removing Negative Credit - Know Your Rights

Steps to Repair Your Credit

1. Each item on your credit report must be proven or it cannot remain in the report. If the credit bureau cannot verify the item when investigated, it must be removed from your file whether or not it's true.

2. Every negative entry on your report can be denied or challenged at any time. The bureau must reinvestigate and if that item cannot be verified within a "reasonable amount of time", it must be removed from the file.

3. Items when challenged can be mistakenly erased. Consumers say they often experience computer operator mistakes.

4. Many times the creditor does not re-verify in time or the credit bureau is busy and does not handle your dispute properly. It must then be deleted.

5. The older an item, the more difficult re-verification is. It is possible it cannot be verified because records may no longer exist after 1 or 2 years.

Consumers have found it possible to eliminate negative marks on credit reports simply by going through this process of disputing items over and over again. Since many creditors won't take the time to defend the negative item, eventually you can "repair" your credit through default by your creditor not responding to the credit bureaus request to verify the item. This commonly occurs. The creditors do not always have time to deal with a bothersome piece of paperwork and that is your advantage.

Once you are happy with the changes made to your report you will then want to review your credit report often. This will ensure that nothing irregular is happening in your name such as identity theft or something similar. Even when something as this does not occur there can still be even smaller errors that occur. When a lender assesses your eligibility for credit if it contains any errors or omissions your chances are that you will be denied.

Naturally, when your concern is to practice healthy credit risk management your goal will be to ensure that your personal line of credit will always be available to you. Your personal credit history will determine just how available loan funds will be to you for your next major purchase.

Pay your bills on time and when possible pay of the balance each month rather than building interest payments. Continue to review your personal credit record and look to ensure your personal credit rating is at a level that you are happy with. If you find there are discrepancies at all on your personal credit report be sure to engage in personal credit repair right away.

Your personal money management goals should be geared towards saving as much as you can without having to do without. When you have your credit concerns dealt with you can then relax and enjoy the life that you have made for yourself and your family.