Debt Free

It's often been said that knowledge is power, and that's never been more true than when dealing with your personal finances. Weather you're trying to become debt free, build your business empire, or maximize the power of your investments, the more knowledge you have, chances are the better you'll accomplish your task. One area where that's especially true is your credit report. Having a thorough understanding of that window into your financial soul can potentially save you money and years of distress.

These days it's a bit easier to become appraised of your financial picture via your credit report than it's been in the past. You have the ability to not only get your report and resultant FICO score on line, you can do it without shelling out the very money you're trying to protect in the first place. The three major credit bureaus, repositories of your credit history that businesses use to asses creditor risk, are Equifax, Experian, and Trans Union. Each are now required by law to give you one free copy of your credit report each year. You should avail yourself of this opportunity like clockwork.

Get a copy of your report from each of the three agencies annually, and split it so that you get one every 4 months. By doing so, you'll get a better picture of what the hell's going on out there at various points throughout the year. After you get the report, you have to actually look at it. Now is a really great time to do this. As I discussed in my post on Dec. 6^th about doing a year end financial review, you need to get a complete financial picture at least once a year, and your credit report is a key component of it.

You credit report will be divided into four sections. First will be the section with your name, rank and serial...I mean social security number. Next, you'll find the public record section with all the dirt from your past that's contained in various public data repositories. Public data includes court judgments, foreclosures, and the like. That helps creditors asses their risk before they hand over any money, or that new F-150 you've been eying. Following the public record section, you'll note the (for most people) lengthy section with all your credit history. Contained therein will be such things as credit card account history, mortgage payments, and the like. You'll find both late and on time payment information for some types of debts, such as your mortgage and credit card accounts, but only derogatory information for others, such as utility accounts and other everyday bills.

Bringing up the rear is the section on credit inquirys. When someone pulls a copy of your report it be classified in one of two ways, either a 'hard, or 'soft' request. Soft credit inquiry s don't show up on your report, while hard ones do. Soft credit inquiry s consist of things such as background checks, checks by existing creditors, identity verification and you pulling a personal credit report. On the other hand, hard inquirys do affect your FICO score. Hard inquirys are for such things as new credit card accounts, mortgages, and loans for personal property such as cars and that new Ski Centurion you've been coveting. Every time you even try to open a new account like that, it will affect your credit, and not for the better. Usually banks won't do a hard pull when you open an account, but they can do so. One common scenario is if you're asking for things such as overdraft protection on your checking account.

After you get your report and go through it with the proverbial fine toothed comb, you'll want to make a list of any suspect information you've found it to contain. It's vital you purge the report of any inaccuracies you've found. You didn't really get a $500,000 HELOC? Now's the time to get rid of that bogus information. Prepare to write a lot of letters to creditors and the credit reporting agencies, although hopefully your report will be error free, and you'll not have to.

If you do find any problems, you'll have to compose a dispute letter explaining why they don't know what the hell they're talking about, but please do it in a nice way. Send copies (copies only, please) of any documentation supporting your position. You should send the correspondence suing receipt confirmation so you can be sure it was received by the appropriate parties. Make sure you send everything to the correct address. Often it'll be different from the normal billing address. During this process, you should contact the creditor first and give them time to correct the error before you send the letter to the credit reporting agency.

With a bit of diligence, you should be able to purge your credit report of any bad data, and subsequently increase your FICO score. Good luck in your continuing attempt to get debt free.