The very first step you need to take when trying to raise your credit score is to find out what your score is and what it means. Legislation called the FACT Act was passed that allows all Americans to get one free copy of their credit report every year. This report lists all of your debts you’ve had and your payment history on those debts.

It will tell you where you owe money, how much you owe, and how you pay (on time, 30 days late, etc.). All of that information is compiled together and then analyzed.

After the analysis, a number is assigned to you as to what your credit fitness level is. Potential creditors then look at your credit score and decide if you are going to be able to pay back the amount of money you are requesting to borrow.

That’s the short version. Actually, there is much, much more involved in determining your credit score. However, what should be important to you knows how to read your credit report and how to raise that score so that you are able to get the things you need. Remember that – the things you NEED, not the things you WANT!

Let’s start with how to get your credit report in the first place. There are three major credit reporting agencies that will offer you the one free credit report you get each year. They are Experian, TransUnion, and Equifax. You can contact each of them directly in the following ways:

- Equifax – Online, you can find them at www.equifax.com. You can also order your free credit report by mail. However, they only offer this option for free to residents in the states of Colorado, Georgia, Maine, Maryland, Massachusetts, New Jersey, and Vermont. All other states are required to pay a $10 fee.

If you do want to do this by mail, send your request to Equifax Information Services, LLC; Disclosure Department; P.O. Box 740241; Atlanta, GA 30374. You can also call them at 1-800-685-1111.

- TransUnion – Their web address is www.transunion.com. As with Equifax, you can also make your request via mail by getting a copy of their mail request form online and sending it to the address provided. You can also call them at 1-877-322-8228.

- Experian – www.experian.com is where you can make a request for a credit report from this credit reporting agency. As with TransUnion, you will need to download a form from their website if you wish to request your credit report by mail.
There are also a myriad of websites who will also allow you to download your free credit report from their websites, but they ultimately will just be forwarding you to one of the above websites anyway. However, they are worth checking out for the information that you can find on them. Here are a few:

- www.annualcreditreport.com

- www.freecreditreport.com

- www.creditreport.com

- www.freecreditreportinstantly.com

The main thing is that you will want to get your free credit report in order to find out where you stand and how far you have to go to repair your credit. Most of the time when you download your credit report, you will be able to view and save it instantly. Save it to your computer’s “My Documents” file if you can. That way you’ll be able to print it out and refer to it as much as you need.

Also, some of these sites offer low-cost memberships that will alert you if a new item comes onto your credit report. Their services will offer many different things, but purchasing a membership is strictly voluntary and probably not necessary if you want the straight truth.

Once you get a copy of your credit report, it’s important to know how to read it. There are going to be an awful lot of numbers, abbreviations and terms you’ve never seen before. Trade lines, charge-offs, account review inquiries — how do you read this thing?

Even though you get one free credit report each year, experts suggest that if you are serious about improving your credit score, you need to examine a report from each of the three major credit reporting agencies. This will, however cost you a small fee from the other two, so keep that in mind.

Why do they suggest you have all three? Creditors can pick and choose which credit reporting agency they want to report to. Some will report to all three, but many won’t. You may find that what is included on one report isn’t on another. The reports will have different information because it’s a voluntary system, and creditors subscribe to whichever agency they want — if any at all.

A credit report is basically divided into four sections: identifying information, credit history, public records and inquiries.

Identifying information is just that — information to identify you. Look at it closely to make sure it’s accurate. It’s not unusual for there to be two or three spellings of your name or more than one Social Security number. That’s usually because someone reported the information that way. The variations will stay on your credit report. If it’s reported wrong, leave it because it might mess up the link. Don’t be concerned about variations.

Other information in this section might include your current and previous addresses, your date of birth, telephone numbers, driver’s license numbers, your employer and your spouse’s name. The data in this section is often used to verify your identity or to confirm that the information you provided for an application is accurate. Small variations in this data between the three bureaus are normal as each agency may have their own recording procedures.

The personal information section of your credit report may also include a “consumer statement.” This is a statement that you asked the credit reporting agencies to add to your report. Commonly, this statement is used to explain a record on your report.

For example, “The Smith Bank account from 2004 was a shared account with my ex-husband.” This statement does not impact your credit score but may help you clarify a situation to a potential creditor or lender and improve your chances to obtain credit.

The next section is your credit history. Sometimes, the individual accounts are called trade lines. Each account will include the name of the creditor and the account number, which may be scrambled for security purposes.

You may have more than one account from a creditor. Many creditors have more than one kind of account, or if you move, they transfer your account to a new location and assign a new number. The entry will also include:

- When you opened the account

- The kind of credit (installment, such as a mortgage or car loan, or revolving, such as a department store credit card)

- Whether the account is in your name alone or with another person

- Total amount of the loan, high credit limit or highest balance on the card

- How much you still owe

- Fixed monthly payments or minimum monthly amount

- Status of the account (open, inactive, closed, paid, etc.)

- How well you’ve paid the account

On Experian’s report, your payment history is written in plain English — never pays late, typically pays 30 days late, etc. Other comments might include internal collection and charged off or default. Charged off means the creditor has given up, thrown in the towel. Basically, the company has made efforts to collect the debt, realized that it’s not going to be paid, and subsequently wrote it off.

Other reports use payment codes ranging from 1 to 9; an R1 or I1 on a report is an indication of a good payment history on a revolving or installment account. Often, the code key will be listed on the report so you can better understand what the codes mean, but they may not.