Improve Your Financial IQ - Check Your Credit Reports and Scores
Over the next couple of days I will be focusing on credit. It will be a 4 part series, the first of which is this here post, Getting Your Credit Report(s) and Score(s). The next installments in this mini-series will be “What Hurts Your Score”, “What Helps Your Score”, and “Why Do You Need Good Credit”.
Without further ado (and in no particular order), here’s what you need to know when it comes to getting your credit information. Use the links below to quickly jump to the desired section.
How many credit files do I have?
Can I really get free copies of my credit report?
What’s the difference between my credit report and my credit score?
Can I monitor my credit for free?
Does requesting my report lower my score?
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You have not one, but three credit files
You have 3 separate credit reports, and each one can contain different information. Each of the big three credit bureaus—TransUnion, Equifax and Experian—keeps its own record on you and gathers information independently. That means each report is unique, and that can mean three different credit scores as well. In order to get your complete credit history, you should consider all three credit reports and scores. This combines all your information in one easy-to-read report.
You are entitled to free copies of your credit report under certain circumstances
Each of the nationwide credit bureaus is required by law to provide you with a free copy of your credit report, at your request, once every 12 months.
To order, visit www.annualcreditreport.com, call 877-322-8228, or complete the Annual Credit Report Request Form and mail it to:
Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281.
You can use the form in this brochure, or you can print it from ftc.gov/bcp/conline/edcams/credit/.
Do not contact the three nationwide consumer reporting companies individually. They are providing free annual credit reports only through www.annualcreditreport.com, 877-322-8228, and Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.
You’re also entitled to a free report if a company takes adverse action against you, such as denying your application for credit, insurance, or employment, based on information in your report. You must ask for your report within 60 days of receiving notice of the action. The notice will give you the name, address, and phone number of the consumer reporting company. You’re also entitled to one free report a year if you’re unemployed and plan to look for a job within 60 days; if you’re on welfare; or if your report is inaccurate because of fraud, including identity theft.
Your credit report is not your credit score.
On the other hand, your score is based on all the items that appear on your credit report. Furthermore, your individual credit report (including the free option) does not include your score, which is a serious shortcoming since it’s what lenders rely most heavily on when deciding whether to give you a loan. You’ll have to pay an extra fee to get your credit score.
Monitoring your credit is not necessarily expensive
If you truly want to manage and maintain healthy credit, you should check your report on a regular basis. This allows you to ensure everything is accurate and help keep your name safe and secure. You may order your free reports from each of the three nationwide consumer reporting companies at the same time, or you can order from only one or two. The best thing would be to order one free copy from a different bureau every 4 months. And the ability to your credit reports online makes monitoring your information much less of a hassle.
Requesting your own report does not lower your score
A lot of people get this one wrong. There is a difference between checking your own credit and having a creditor check your credit. When you check your credit report, it does not harm your credit score, because it’s considered a soft inquiry. Other example of soft inquiries are: a credit bureau may selling a person’s contact information to an advertiser purchasing a list of people with similar characteristics, like homeowners with excellent credit; a creditor checking a person’s credit periodically; or a credit counseling agency, with the client’s permission, obtaining a client’s credit report. Soft inquiries do not stay on your credit report.
Whenever you apply for new credit though, the creditor will request a copy of your credit report, and that’s considered a hard inquiry, which can impact your score. A lender may perceive many hard inquiries on your report as a signal you’re looking for loans because you’re financially over-extended, and will possibly consider you a poor credit risk. So it’s important that you apply for new credit in moderation.
If you have joint credit that’s not under your name, you have no credit.
This one is a no-brainer. If you are a married spouse who holds all his/her credit accounts jointly with your significant other, you have no credit yourself. If you ever get divorced down the road, you will have to start from scratch to build your own credit history. It’s better to start building credit in your own name now.
And obviously, if you have no utility bills under your name, no credit cards, and no loans, you don’t have much of a credit history. That’s commonly referred to as a thin credit file.
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Next up: What Hurts Your Score?
Recommended Reading: How to find a legitimate credit repair company
April 29th, 2008 at 8:22 pm
I’m surprised that joint credit does not count on your individual credit. I have used the free annual credit report option you mention and found it to be a quick and easy way to get my report.
April 30th, 2008 at 2:58 am
No joint credit doesn’t count on your individual credit. Think about it, credit files are individual. Even when people get married, they don’t merge their credit files, each person keeps his/her own reports and scores. There used to be the “piggy-backing” loophole (where you can benefit from someone’s good credit history to boost yours, merely by adding you as a registered user on their account. But the Fair Isaac Corporation (the company that developed the FICO score) has issued an updated version of its credit score system, and the authorized user category will no longer have an impact on credit scores.