There are many benefits to checking your annual credit report. It’s important to stay ahead of any discrepancies that arise to avoid problems later. Becoming aware of any issues allows you to address them. These issues with your annual credit report will affect your credit score. Financial institutions use your score to decide whether to give you a loan. There are many places advertising access to your credit report. But they are not all created equal. This article compares the top three and will tell you which annual credit report is best.
Equifax is the best annual credit report. It consistently uses the most updated FICO score making it more relevant. All three of the major reporting agencies are important. You can obtain your credit report from all three for free. Use all of them over the course of the year to maximize their benefit.
Table of Contents
Why is a Credit Report Important
Your credit report is important because it helps you get any kind of loan. If you want to buy a new car or house it will play a role. The financial institution will use this report to decide how much if any money they want to lend you. Even renting an apartment will cause the landlord to check your credit.
Without knowing you personally, they must quickly decide whether to trust that you will pay your rent or pay back the loan. There’s no crystal ball a bank can use to know if someone will pay their debts on time or at all. The best indication is your history of paying back loans.
Fair Credit Reporting Act
The Fair Credit Report Act describes what information can be on a credit report. It also says who has permission to see these details. Without this Act, it would be possible for outdated or irrelevant information to be on your report. This information would unfairly negatively affect your score. Also, this act makes sure the only people who see your sensitive information have a good reason.
Until 2014, credit reports in Australia only included negative information such as late or missed payments. Now under Comprehensive Credit Reporting, your report will include positive information such as long payment history and low debt ratio.
Fair Credit Reporting Act Violations
An example of a violation of this act includes outdated information that is reported as if it was current. Another problem is when the credit reporting agency confuses someone else for you. This means their bad credit history is put under your name and affects your score. Lastly, the unauthorized access or release of sensitive information would be a violation of the Fair Credit Reporting Act.
How to Get Free Credit Report
Go to the Annual Credit Report website for a free credit report. The link is at the bottom of this article in the Resources section. What you need to get your free report is your name, date of birth, address, and Social Security Number. This information proves you are who you say you are. This ensures the security of the data released. To help avoid Social Security-related scams, Read our Article about Social Security scams.
3 Credit Reporting Agencies
| Experian | 1 888 397-3742 |
| Equifax | 1 888 548-7878 |
| TransUnion | 1 800 916-8800 |
Experian is the biggest of the three major credit reporting agencies. Founded in 1996, Experian now has approximately 17,000 employees. Based in Ireland, they work in 37 countries around the world.
Equifax is the next biggest with about 11,000 employees in 24 countries. Based in Atlanta, they are the popular choice for most countries.
Finally, Transunion has around 8,000 employees in 8 countries.
Which Annual Credit Report is Best?
All three of the major credit reports are accurate. But they do not always contain the same entries. This depends on which agency the creditor chooses to send this information to. Also, there are laws and regulations that help ensure these agencies maintain high standards.
The most important credit agency is actually a credit bureau. FICO is a data research company most popularly used by credit reporting agencies. FICO is the source of the information used to determine your report and score.
All three credit reporting agencies are used to buy a house or a car. So which credit report should I request? Equifax has the best Annual Credit Report. If you only had one choice, use them. Since they are all free and you can request each once a year, do all three.
As you can tell from reading so far, the differences between the agencies are razor slim. The glaring distinction I see is that Equifax used the most updated FICO rules. This means the way they compile your report and calculate your credit score is more relevant to today’s society.
How to Dispute Credit Report
In order to dispute a credit report, the information would have to be inaccurate. This is true in a case of mistaken identity or fraud. You will not have success if disputing a missed or late payment for which you are responsible.
The first course of action is to contact the lender directly. This would be the bank or company that originally reported the negative information to the credit agency. Sometimes you go down that road and it seems like they are running you in circles. In that case, I would then reach out to the Consumer Financial Protection Bureau through the link in the Resource section of this article.
How Long Do Credit Disputes Take?
On average, credit disputes take at least 30 days. Don’t expect your credit report to be fixed overnight. Also, how often credit disputes are successful depends directly on the reasons for the dispute. If there is an obvious discrepancy on who the credit belongs to, this can be an easy win. If the negative mark is being disputed only to improve your credit score, the success rate would be very low. In that case, there would be a 7-year wait until the negative information comes off your annual credit report.
How to Rebuild Credit
- Don’t close unused credit accounts
- Avoid opening new credit cards & loans
- Dispute inaccurate information on your credit report
- Get up-to-date with payments on current loans
- Keep making on-time payments
- Consider Debt Consolidation (Turn multiple loans into one)
- Live within your means
If you have a history of late or missed payments, you may want to know how to rebuild credit. There are some steps you can take below that will help. Keep in mind, this is an on-going process and not an overnight fix.
First, don’t close any unused credit accounts. Closing these accounts means any credit you have available won’t be counted in your favor when calculating your debt ratio.
Also, avoid opening new credit accounts since this will be a signal that you need credit. If you need credit, it is because you are otherwise short on money. Opening a new account also lowers the average history and age of the accounts you are associate with.
How to Remove Paid Collections from Credit Report
To remove late payments from a credit report, you will have to settle the debt by repaying. First, contact the credit directly. You may be able to negotiate and pay only a reduced amount for the debt to be cleared. In exchange for your payment, ask for them to contact reporting agencies so your annual credit report can be updated.
Before you sign or agree to anything, have them supply you with a letter or written confirmation of the conditions agreed upon. It’s important that you do not admit fault or take responsibility for a bill until you have something in writing.
If the about method does not work for you, it may not be possible to remove a late payment from your credit report. A dispute will not work unless the information on your credit report is inaccurate. Negative information stays on your credit report for 7 years.
Is Credit Repair Worth It?
It’s a slow process that takes mostly common sense. It’s usually not worth spending money on companies that make unrealistic promises. Don’t expect overnight results. Be wary of 100% guarantees. Use that money instead to get current on your loans or pay down your debt to help your debt ratio.
Why Freeze Credit Report
If you see suspicious activity on your credit report, your information may have been compromised. There are other possibilities such as a mistake, but it can be hard to tell the difference. Contacting the three credit reporting agencies directly to freeze your credit report is easy and free. It can also be unfrozen before you make a large purchase or loan.
This is a good idea for elderly parents, the young, or someone who passed away in order to prevent fraud. I can think of a handful of cases of deceased people getting fake loans. This is a double whammy that brings up emotions that may be avoidable if credit is frozen.
Building Credit
Starting to build credit is an important factor in your overall success in building credit. Establishing a long credit history tells creditors you have been trusted with credit for an extended period. This takes a lot of their guesswork when deciding to give you a loan. Your children are eligible for a credit card once they turn 18 years old. This is a good idea if you can teach them how to only use it when they have the money to pay it off every month.
Using an auto-payment feature is an important tool to ensure you never miss a payment. It doesn’t matter if you are not paying the balance in full. What’s important is that you prevent negative entries on your credit report.
Next, I recommend you limit the number of debts you have through debt consolidation. Decreasing the number of loans, you have can help your score.
Debt consolidation does not help with your debt to credit ratio. The only way to do this and the best way to build credit is by living within your mean. Credit is spending money you do not have. If you do not have the money, make sure the spending is necessary.
How Credit Score is Calculated
To help build your credit, it’s important to understand how your score is calculated and why a credit score goes up and down. Requesting your own report does not affect your score. One factor that does affect it is payment history. Long credit history of on-time payments is a signal to creditors you will repay future debts.
As mentioned above, your debt to credit ratio is a key factor. This is the difference between how much money you owe minus the assets you have available.
Lastly, another consideration is the number and frequency of open lines of credit. It’s impossible to predict the future if someone is trustworthy enough to repay a loan. Because of this, all factors including how much credit someone is requesting play a role.
Build Credit without Credit Card
Without a credit card, the other most viable option is through consistent and timely repayment of a loan. This can be student loans, a mortgage, car payment, or others. Another option is to ‘borrow’ a family member’s credit such as a parent or spouse to co-sign your loan. Now the creditor will take their good credit score into account instead of just yours.
How Fast can your Credit Score Improve?
Repairing your credit by removing inaccurate information can take only a couple of months. Otherwise, the negative information will stay on your report for 7 years. Your score will slowly improve during this time as long as your payments are current and timely.
Credit Scams to Watch Out For
If you’re worried about credit scams there may be a good reason. I don’t say this to scare you. The reason is that no one is immune. The three major credit reporting agencies have all fallen victim to breaches.
In 2019, someone unlawfully used data accessed from Transunion. Although some people may consider it a data breach by technical definitions, the result is the same. Approximately 40,000 customers had their personal information potentially exposed.
Experian fell victim to a data breach by hackers in 2015. 15 million people were affected by this breach. In 2020, it happened again. This time, 24 million customers were involved.
The biggest data breach happened to Equifax in 2017. In that hack, 147 million people had their personal information exposed to the public. These data breaches certainly put these companies in the limelight, but no company is immune from hackers.
Is Credit Repair Legal
With all the worry about scams, it’s often questioned if credit repair is legal. In the US, credit repair is not only legal but also a federally protected right. The problem lies with untrustworthy companies and scammers. Sometimes they sell credit services that don’t really. Or as you’ll read below, there can be hidden costs.
Free Credit Report Scams
The websites FreeCreditReport dot com and Consumer Info dot com were fined by the government for fraudulent business practices. When people sign up for their free credit report, they automatically enroll them in a reoccurring service. If they forgot to cancel the subscription within 30 days, they had to pay a fee. As a result of this scam, these websites had to pay back the money they made plus a fine.
Conclusion
- Equifax is best (But use all three)
- Use one every 4 months
- Avoid any Fees or Sign Ups
It’s a close call, but Equifax is the best annual credit report. The reasons used to decide how your credit score is calculated are routinely updated. This makes sure your score stays relevant to the current economy’s situation. Newer may not always be better, but it’s a good sign to see a reporting agency being proactive. This gives me more confidence in their work.
As I said, it was a close call because all three of the major reporting agencies are important. Because they are free to use, I recommend you use all three. The information may not all be the same. One of the three may show a problem you would want to fix and otherwise would not know about. Use all of them over the course of the year to maximize their benefit.
Annual Credit Report Resources
Go to annualcreditreport.com to get your free credit report. I do not benefit from this link and there are no hidden costs. Avoid any websites making you pay or that enroll you in a reoccurring service.
File a Complaint with the Consumer Financial Protection Bureau at consumerfinance.gov/complaint.
If you are having problems fixing your credit, let me know. Contact me and I may be able to help.