Credit reports and credit scores: these two topics are very important for your financial health. Together your credit report (sometimes called credit history) and credit score are a measure of how financially responsible you are. The more responsible you are the easier you can borrow money and get good terms. A prime example is home buying; most people at some point will borrow money to buy a home, and your credit report/credit score weighs heavily on how much you can borrow and under what terms. The ability to borrow money is largely based on the credit history and credit score, but credit history can also affect your job, your insurance rates, interest rates you receive, apartment/home rental, utility bills and more.
This post will be about credit reports; credit scores will be covered in the next post because the article was getting too long. Today we will go over the following topics:
- What is a credit report
- Checking your credit report
- Obtaining your credit report
Credit Reports
Credit reports and credit scores are closely related, but are not the same thing. A credit report is a look at your complete borrowing history up to and including your present status. A credit report normally includes the following items:
- Personal info such as name, SSN, employer and past places lived
- Types or credit you opened
- When you opened the credit account and when you closed the account (if applicable)
- Dollar values on loans and limits/balances on credit cards
- Joint account owners (such as a spouse)
- Your payment history on all accounts (if you pay on time or missed payments)
- Credit inquiries
- Past arrests, lawsuits and bankruptcy (if applicable)
The two main types of credit accounts you will see on a report are installment loans and revolving accounts:
- Installment loans are normal loans and mortgages that are paid in monthly installments (fixed amounts).
- Revolving accounts are credit cards; they are revolving because balances are allowed to carry over month to month.
For many people their credit history begins with their very first credit card, or it might begin with your first loan. My oldest credit entry in my file is my first credit card that I got from our home town credit union. My credit report also includes all the credit cards I have, or have had, as well as auto loans and mortgages. In applicable cases, like the mortgage, Amy is listed as a joint account holder.
Checking Credit History
It is important to check your credit history on a regular basis for several reasons:
- It is free
- To see where you stand with your overall credit picture
- To ensure there are no errors on your credit report
- Might be one of the first signs your identity has been stolen
Your credit history can show you how you are doing with using credit responsibly. Hopefully your credit report is good overall, but even if you had some mistakes in the past hopefully now you have turned things around. It is important to look for any errors or missing information in your credit report. If your credit report has errors then you will have to contact the respective credit agency to get the errors corrected. If you see accounts on there you did not open your identity may have been stolen. In that case you need to immediately address it with the agency and the bank the account was opened at.
Obtaining Your Credit Report
Now let’s talk about how to obtain your credit report. Consumer credit reports are created and maintained by the big three nationwide credit agencies:
- TransUnion
- Equifax
- Experian
The above agencies gather information about you from banks, credit card companies, and other businesses you have accounts with. Some banks/lenders do not report information to all three agencies, so occasionally your credit report may differ slightly among the three.
Getting your credit report is quick and painless today courtesy of the Fair Credit Reporting Act, which was enacted by the US Government in the 1970s. Under the FCRA all three of the big credit agencies are required to provide you one free credit report each year. All three of the credit agencies and many other financial institutions will gladly sell your credit report to you; don’t fall for it.
There is only one official website to obtain your free credit report, and the link is below:
https://www.annualcreditreport.com/index.action
If you do a web search be careful because there are many sites that will sell you a credit report. Make sure you only use the official site. It should look like this:
Now you may be thinking since I get three reports each year how often should I pull a credit report? Great question, and there are two basic ways to go about getting your credit reports over the course of a year:
- Get all 3 free reports at once – this method is good if you have a major purchase, such as a home, or a significant job change coming up. If this applies to you I would recommend pulling all 3 of your credit reports about 2-3 months before the event. That will hopefully give you time to correct any errors that may be present.
- The other option is to spread out the reports evenly through the year, so get one about every 4 months. This is the method we have been using since I joined the Navy. The advantage to this method is you can monitor your reports every few months, so if something strange appears on the report you find it sooner. If you pull all reports at once you have to wait a year to see a new one.
It is your choice what method to use. Either way I strongly encourage you to take advantage of the free reports each year. All it takes is a few minutes on the web to get your report; time well spent if you ask me.
Sources
https://www.myfico.com/credit-education/credit-report-credit-score-articles/
https://www.usa.gov/credit-reports