Credit reports 101Credit reports can be a difficult concept to wrap your head around, whether you’re a fresh-faced college grad or approaching retirement, but they contain information that is vital to all areas of your life. The better you can grasp the basics of your credit reports, the easier it will be to make decisions that boost your credit history rather than damaging it. Obtaining copies of your credit reports is one thing, but understanding what they say — and how that impacts you — is another. Understanding your credit reports can not only be helpful to plan out when to take out a loan or buy a new car, but it can also be the best protection available against identity theft, erroneous reports and other negative elements that could impact your credit scores. In honor of National Consumer Protection Week, we’ve rounded up the six basic things about credit reports that you should know.

1. Every person has three credit reports, and they’re all slightly different. The first lesson in credit reports 101 is to understand that you don’t just have a credit report, you have three of them. There are three credit bureaus that creditors, such as credit card issuers or your auto loan provider, report to: Equifax, Experian and TransUnion. Most creditors don’t report to all three credit bureaus, which means that an item which shows up on your Equifax credit report might not appear on the other two. This is why it is necessary to check over all three reports, rather than just one, because failing to do so might cause you to miss items that have been reported wrongly. If you’ve been turned down for a loan or a credit card but don’t understand why, make sure you’re looking at all three credit reports — you just might be missing something important.

2. You can view your reports for free once a year. It might come as a surprise to some, but by law, every person in the U.S. is entitled to view their credit reports from each of the three bureaus once per year (every 12 months). This is thanks to the Fair Credit Reporting Act, which provides citizens with a number of rights relating to their credit reports and the credit bureaus. To request your free copies, you can visit AnnualCreditReport.com, which is government-operated and sponsored by the three bureaus. Remember, you can only view your reports once, so it’s a good idea to have access to a printer so you can save each report for later reference. It should be noted that you’ll have to pay an extra fee to view each of your credit scores.

3. It pays to keep an eye on your credit reports all year round. All consumers should absolutely print and view their credit reports every 12 months, but in a world where identity theft is a growing problem and data breaches leak sensitive information all the time, that really isn’t enough. The ability to access your credit reports on a regular basis is invaluable, whether you’ve got great credit and plan to keep it that way or are working to rebuild yours after a financial misstep or two. Fortunately, credit monitoring services — like Identity Guard, which offers plans for individuals, couples and families — not only offer regular access to your credit reports, but also let you see your credit scores and keep you updated with timely alerts whenever a change in your reports or scores is detected. Additionally, many will assist you when it comes to contacting the credit bureaus in case you need to file a dispute. You can read reviews of the top-rated credit monitoring services on our site to decide which one might be your best option.

4. You don’t have to be an expert to decipher your credit reports. Once you’ve got copies of your credit reports in your hands (or you’re viewing them online), you might feel slightly overwhelmed trying to parse what the different sections and labels mean. Fortunately, your credit reports can be broken down fairly easily. Ultimately, all credit reports can be divided into four types of information: identifying information, credit history, public records and inquiries. You can see an example of how this setup works by viewing this sample credit report on Experian’s website. Your TransUnion and Equifax credit reports may look somewhat different, but in general all credit reports follow the same structure, making it rather easy to identify what information they share — as well as where they diverge. If you opt to sign up for a credit monitoring service, it will translate each credit report into an easy-to-read format that may be better for you to understand.

Most credit reports will tell you which items are viewed as potentially negative, as well as which are viewed as positive. Pay attention especially to the negative items, since these are the ones that can bring your credit scores down and cause problems. If you don’t recognize something, you are within rights to request more information. AnnualCreditReport.com has a page with information on what to look for when determining whether the items on your reports are legitimate or not.

5. Items on your reports won’t be there forever. If you’re concerned about an account that went into collections or a defaulted loan, the good news is, it won’t be there forever. The way it breaks down, according to Equifax, is this: unpaid accounts, late payment history, collections accounts, etc. will remain on your credit reports for seven years, while accounts marked as paid will remain for up to 10 years. There are some exceptions, and certain states have laws that might affect how long something remains on your reports, so it’s best to do your research if there’s something you aren’t certain about. The reason positive items remain longer than negative items is fairly obvious — it gives consumers the chance to rebuild after negative impacts on their credit, since the good credit will outlast the bad. Of course, if you’re planning to try and rebuild your credit, it’s best to be diligent about paying your debts and keeping your accounts in good standing so you don’t add another seven years onto what’s already there.

6. You can dispute incorrect items on your credit reports. Many people see ads for credit repair services and mistakenly think these services are capable of magically erasing negative entries from their credit reports, no matter what the debt. Unfortunately, if an entry on your credit report is legitimate, even if you reach a settlement or pay the debt off in full, you’re still going to have to wait it out before it gets removed from your credit reports. There is no magic eraser for a credit report riddled with derogatory items except for time and good credit behavior in the meantime.

However, if you notice something on your credit reports that doesn’t add up — a credit card you know you never took out or a mortgage account for a home you never owned — you do have the right and capability to file a dispute with the credit bureau (or bureaus, as the case may be) in question. The bureau must then investigate, and if it determines you are in the right, the item in question will be removed from your credit report. This can be a time-consuming process, which is why credit repair services can be helpful, since they do the legal legwork on your behalf. That said, there’s not much a credit repair service offers that you can’t do yourself (if you’re willing to put in the time), so it’s advisable to take advantage of these services only if you’ve got lengthy credit histories full of errors to untangle.

Understanding your credit reports can feel a lot like learning a foreign language, but once you know the basics, you’re well on your way to being in control of your financial situation. Follow our credit monitoring blog to learn more ways to improve your credit reports and keep tabs on your credit reports.

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