Understanding Your Credit Report

Do you want to revisit those childhood memories of showing your parents a school report card? Try showing a lender your credit report. Before any financial institution lends you a nickel for a bad credit mortgage, they scrutinize your credit report, which includes a wealth of personal financial information. It can either make or break your loan application, especially if you have less-than-perfect credit.

What's a credit score?

A credit score is a numerical rating of your ability to handle debt. The score is generated by looking at a number of factors, including current accounts, your timeliness on debt payments in the present and past, and any history of bankruptcies or judgments.

There are three credit bureaus-TransUnion, Experian, and Equifax-which accumulate data on your credit history. They then create credit reports, which are provided for a fee, to prospective lenders when you apply for a mortgage refinance or debt consolidation loan. There's always the chance of human or computer error when it comes to finances. For example, one of your credit cards could have mistakenly given you a late fee, which will impair your score. You should also be on the lookout for new accounts on your report that you did not open, a sure sign of identity theft.

Ensuring a squeaky clean report

Get a copy of your credit report from one of the bureaus mentioned above. Once you do, become familiar with the details. Make sure that all the information is correct. If it's not, contact the credit bureau immediately. Simply by correcting your report, you can boost your score. You can also pinpoint any outstanding loan defaults or judgments that you may have overlooked. Ultimately, it will give you a better sense of your overall financial picture when applying for a bad credit loan.

Like report cards of days past, credit reports are a reflection on you. By making sure that yours is accurate, and taking steps to improve your score, you could wind up with a credit report that sends you to the head of the class.