3 Reasons Not to Skip Over Your 3-Bureau Credit Report
While most borrowers are concerned about the single number that measures their credit risk — the credit score that ranges from 300 to 850 — it’s worth your while to obtain your 3-bureau credit report and review it from time to time, even if only once per year although reviewing them more regularly is ideal. The three main credit reporting bureaus are, of course, Equifax, Experian and TransUnion.
Luckily, the reports are not difficult to obtain, and over the years, the bureaus have made the reports much more consumer-friendly, so they are relatively easy to understand. So why is it so important? Let’s have a look at a few reasons it makes sense to review your three-bureau credit report in detail.
1. Check for Mistakes
This is perhaps the single most important reason to check all three of your credit reports: there might be information that needs to be removed from one or more of your reports.
Some of these might include negative hits, such as a credit card charge-off, that are supposed to disappear from your credit report after a certain amount of time. For example, a missed payment is only supposed to stay on a credit report for 18 months. Such items, if they are still on one or more of your reports, might be contributing to a lower score and you’ll want to have them removed immediately.
To a lesser extent, you might have glaring errors, such as credit cards or loans in someone else’s name, that somehow ended up in one of your reports. These may have been the result of a clerical or processing error by an employee at the credit bureaus or at the bank. Contact the credit bureau to have such errors removed immediately.
2. Understand Discrepancies
It’s important to note that not all creditors report the same information to all three credit bureaus. You might, for instance, notice that a line of credit you opened at an auto repair/tire shop two years ago appears on a report for one bureau, but not for another.
This occurs because the process of reporting a consumer’s credit activities to the agencies is completely discretionary and voluntary. Finance companies, creditors, landlords, utilities companies and others decide which information they wish to share with the agencies. Further, the agencies then decide how to treat that information on your reports.
If you discover that a particular loan or credit card account, for which you have a stellar payment history, does not appear on one of your reports, you might wish to contact the bureau and ask why. It is possible that they can make an inquiry and pull that data into your report.
3. Increase Awareness of Debt
Of course you are aware of the credit cards you have and the loan payments you are making, but reviewing your credit reports can give you a big picture perspective on debt and how you interact with it. Despite financial gurus urging consumers to live debt-free, cut up credit cards, pay off all debts and live in a cash-only world, this can cause harm to consumers down the road when they need to apply for a mortgage, co-sign on loans for children or negotiate the terms on emergency debt.
The ability to manage debt is crucial for everyone’s financial health, and studying one’s credit reports can provide deeper insights than simply reviewing monthly credit card or loan statements, or obtaining the single 300-850 point score.
Credit Simulations and Credit Modeling
Because each credit agency calculates its own credit score using its own models, differences between reports can produce vastly different credit scores. Most borrowers seek the highest score possible, of course, and one that is consistent. The ability to view, understand and manage your credit is key to putting yourself in the strongest position when applying for loans.
Borrowers should consider utilizing a tracking tool, such as SmartCredit, that provides monitoring of credit scores and helpful suggestions for actions to increase your score. Such a tool can help individuals understand the dynamics of credit and the impact of open and closed credit accounts on their overall score.