If money makes the world go ‘round, it is rotating on an axis of credit. In business-speak, the best founders think of credit as an investment within themselves. Rather than going to the bank for a loan or seeking out angel investors, tens of thousands of dollars in capital can be accessed via credit cards. That is, if your credit report signals to the credit card companies that you can, indeed, invest this money wisely and pay them back.
But, what if credit reports aren’t always accurate? We tend to think that they must be, and just assume that when we’re given a credit limit, it must be based on something factual and fair across the board. That actually may not be true. Arnita Johnson-Hall is a millennial credit coach and consumer credit advocate whose blog, Luxurious Credit, has been helping women truly understand their credit. And this is imperative, as, according to CBS News, “79% of all credit reports contain errors, and 25% of those errors cause a consumer to be denied credit.”
At a time when entrepreneurs need more financial leeway than ever, knowing how to analyze your credit report, scan for errors, and access more credit can be life or death for your business. Johnson-Hall has been helping women dispute the inaccuracies in their credit reports for almost a decade – here are her tips.
How To Analyze Your Credit Report
Johnson-Hall says the first and most important step to understanding your credit is to know how to analyze a credit report. “Actually understanding your credit report can mean the difference between fair and great credit,” she explained. “It’s only when you have a precise understanding of where you stand with your lenders, guarantors, and creditors that you can truly see what your current credit circumstances are and how to improve them.”
To do this? Get a credit report and actually go through it with a fine tooth comb. “I always tell clients and women to stop taking the report for face value or just as fact. Just because it’s a report from a trusted credit company doesn’t mean it’s fully accurate.”
Johnson-Hall said that the major credit companies (Equifax, Experian, and TransUnion) all share the same information in the credit reports, but in slightly different formats. “What’s important to know is that these credit reports are exactly what companies or creditors see when they run your credit,” she explained. “Assessing the accuracy of everything is important, but specifically look for the following.”
- Safescan alerts. “This is how you know whether or not you’ve been a victim of identity fraud,” Johnson-Hall explained. “The report runs across your social-security number to see if it’s been used or associated with another other person, dead or living.”
- The profile summary. “This contains pertinent information such as your highest and lowest credit limits, how many accounts you have open (including foreign bureau accounts), and the existence of all public records.”
- Inquiry alert, which is how many inquiries have been made for credit applications or excessive rent inquiries.
- Tradelines, which is where details about your credit accounts will be. This can include such as account numbers, terms of agreement, credit limit, balance owed, 24 month history, delinquencies, and more.
“Assess everything on the credit report, and look for anything that isn’t factual,” Johnson-Hall urges. “It’s imperative that every lender who sees your report actually gets an accurate picture of your credit history.”
Improving Your Credit
Johnson-Hall added that one major way to improve your credit report is to add a consumer statement to it. “This is where you can share your side of the story, or add color to certain sections,” she explained. “For example, maybe there was an extenuating circumstance for a past delinquency, but it was many years ago and you’ve worked through it.”
Beyond that, sometimes your credit needs an overhaul if it’s not quite where you want it. “Much of improving credit comes down to habits, such as living with your means and paying bills promptly,” Johnson-Hall explained. “I’ve found that many of the women I work with don’t mean to be late on their bills, but have a habit of setting them aside when they receive them, then forgetting to pay them.”
For this reason, having bills on auto-pay or paying them immediately can help to resuscitate a credit score. She also recommends decluttering and simplifying your entire financial practice. “Opt in for electronic bills instead of paper bills, and organize all of this expense information on apps or online resources. Apps like NeatDesk or NeatReceipts are great ways to save paper receipts without having a pile of them on your desk or scattered around your house. Log them right after you get back from dinner or shopping, so that you don’t forget or lose them.
“Additionally, create a routine of looking through your expenses every week to see where the money is really going. Also, consider putting a large chunk of your income into saving to resist the temptation to spend just for spending sake. There’s a tendency to see that there’s disposable money, then start thinking what you can spend it on. Eliminate this tendency as much as possible so you always have more than enough for your bills.”
Building credit leverage is a two-pronged strategy: ensuring that your current credit report is accurate, and doing your part to increase your credit, one small financial habit at a time.
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