There is a very strong relationship between loans and credit scores of the borrower. Before you enter into any type of agreement with the moneylender, make sure that you not only know about your credit but also about other intricacies of money lending process.
First, you must know who all can access your credit report. Ideally, based on your loan application made your credit report can be accessed by:
- A money lender, banks and other financial institutions from who you want to borrow
- The collection agencies when your loan account goes to them when you default in making payments
- Your insurance company for the purpose of underwriting if need be
- Your employer if you give the consent
- Your potential landlord after you give the permission and of course
- You for free.
There may be several other entities that may access your credit report as and when necessary but they must have the ‘permissible purpose’ of doing so as per the rules defined and laid by The Fair Credit Reporting Act.
Reviewing Your Credit Report
The Fair Credit Reporting Act also provides you with the right to review your credit report once every year. You can get a free copy from any of the three nationwide credit reporting agencies namely Equifax, Experian, and Transition.
Now, this rule is really very helpful. As you can request for your credit report once a year from any of these three agencies, it is prudent that you make your request after every four months from each of these credit reporting agencies. This will enable you to keep an uninterrupted track of your credit record. In case there is an anomaly you can make a complaint to the Credit Bureau and request it to be rectified as soon as it happens. This will help you to retain the health of your credit report and in turn, help you to obtain a loan easily at a reasonable rate when you apply for it form a bank.
Things to Look For
There are few specific things that you should look for in your credit report as these are also the things that any money lender will consider prior to giving you a loan. According to the Consumer Financial Protection Bureau, you must review the following in your credit report:
- Inaccurate or erroneous entries and incomplete information
- Items or loan accounts that are not your
- Your address and those addresses if any, where you have never lived
- Names of employers for whom you have not worked ever
- Any information that should not be in the credit report any longer and
- Any negative information or otherwise that may have happened more than seven years ago.
If you find any mismatch, then use your FCRA right to get everything cleared.
Things the Lenders Look For
In particular, when you apply for a loan, the money lenders will look for a few specific items in your credit report such as:
- Any late payments made in any of your previous loan accounts
- Any account that went to the collections and whether it was resolved and how
- Any items that have been written off due to bad debts in the future or bankruptcy
- Any accounts that should have been closed by now but still exists
- Any account that you did not remember to open
- Your debt to income ratio to find your current ability to repay a new loan
- Also your debt to credit ratio which is the total balance outstanding as compared with the total credit that you can borrow currently
- Any liens thereof in any of your debts and
- Whether there were any hard inquiries on your credit.
It is only after the money lender is satisfied with your ability and high credibility they will approve your loan.
The Score is Not Included
Usually, your credit score is not included in the free credit report that you will get annually. However, there are several credit card companies now that will provide credit scores for free on your billing statements. They may also provide it to you online with the intent to draw and retain your business.
Apart from that, there are several personal finance apps and many mobile banking services that will inform you about your credit score for free. However, you must keep one thing in mind that different money lenders may use diverse versions of your credit score.
Disputing and Correcting Errors
There may be a few items in your credit report that you may dispute. If you find any errors in your credit report you must contact the reporting agency immediately and also the creditor that has provided that particular information. You will find relevant instruction of disputing such errors in your credit report itself but it is very important that you contact both the creditor and the reporting agency to inform about it.
Before applying for a loan through or a bank you must rectify the errors in your credit report to increase your chances of obtaining a loan easily.
- The process for rectification includes providing information and documentation to support your dispute. You will have to give some time after making such claims for the creditor to remove or amend the errors in your credit report.
- If there is a false credit card charge on an item you never purchased, ordered or received you must get in touch with the creditor that mischarged you within two months after receiving the bill containing the error as per the Federal Trade Commission ruling.
- After the creditor resolves the issues in your favor, it is also the responsibility of the creditor to notify all of the credit reporting agencies about the changes made in your report to remove the erroneous information.
- If the creditor in the case does not resolve the issue then you must ask for a statement of it to be included in the file.
If you still unsatisfied with the results and the dispute still exists, you can surely file a complaint with the Consumer Financial Protection Bureau.