Your Credit Report: Why the Yearly Review is Necessary

Knowing your credit score and understanding your creditworthiness is key to maintaining or improving your financial standing. Your credit history affects everything: from getting a phone with a monthly plan, to buying a house, to getting a great rate on your credit card. Monitoring your credit report also helps confirm that no one has tried to steal or use your identity. For the small business owner, your credit history can affect your chances of getting a loan for your business. The legal structure for most small businesses – specifically, sole proprietorships, where business and personal finances are legally inseparable – requires that business owner finances and creditworthiness be taken into account in loan applications. Most lenders will look at a business owner’s credit report, to gauge the likelihood of a loan being repaid.

Accessing your credit report

The Fair Credit Report Act ensures that you have free access to your credit report from each of the major credit reporting bureaus - Equifax, Experian and TransUnion - every twelve months. While the report will not give you your credit score for free, it will give you a summary of all the pieces that constitute your credit history. This includes a list of all accounts that affect your creditworthiness, any inquiries made about your credit, public record information, as well as a summary of your credit status, including real estate and mortgage information, revolving accounts, installment plans and collections.

Once every twelve months, you can access your free credit report for each of the major bureaus from Annual Credit Report.

You may also be eligible for a free report in special circumstances:

  1. If a company denies your application for credit, insurance or employment, based on your credit report.
  2. If you suspect an inaccuracy on your report due to fraud, identity theft, or an error.

Understanding Your Credit Report

The most important reason to check your credit report is to ensure that all information is correct. Does the report indicate that you’re not making payments that you are in fact making? Is there a blemish on your record that you were not aware of, due to a bill going to the wrong address, an outstanding debt, or something else? Although some states require that a person be notified when there’s a report against their credit, not all do. Checking your credit report regularly can highlight these problems before your credit profile is negatively affected.

Dealing with Problems on Your Credit Report

Outstanding issues on your credit report can affect your ability to get a loan or line of credit, as well as the rate you’ll pay to borrow. If you notice issues that need to be resolved, start by contacting the creditor directly. Speak to them about the issue to determine if they can help you resolve it. Oftentimes, this is the fastest way to rectify a problem. Once they correct the mistake, they are required to send that information to the credit bureaus on your behalf. This works best if the type of dispute you have is related to your ownership of an account, the terms of that account, the outstanding balance, whether you’re paying on time, etc.

If the creditor is unable to resolve the issue, you can file a dispute directly through the credit bureaus:

Contacting the credit bureaus directly is also the best way to rectify incorrect personal details such as your mailing address, social security number and legal name. You must include copies of documents that support your position – keep originals for your own records. The credit bureaus have 30 days to investigate your claim and make a determination. You will receive the results of their investigation in writing. If the investigation results in a change to your credit report, you’ll be sent a new copy of the report for free. If the determination is not in your favor, you can request that a statement regarding the dispute be included in your credit report for future reference. For a fee, you can also request that an updated version of your credit history be sent to anyone who has received a copy of your credit report in the recent past.

Checking your credit report annually is a good financial habit. With the free resources available, you can correct errors before they become larger issues. This will ensure you have access to more credit when you need it.

More from the Resource Center: An Introduction to Small Business Financing

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