Credit is very important in your life. If you have credit cards or loans, the banks and companies with which you have them all report data on your use to credit reporting agencies.
The credit reports are used to compute your credit score. Credit scores, in turn, are used to assess you for further credit.
Your Credit Can Have a Major Impact on Your Life
When you apply for a credit card or loan, the interest rate you receive may be dependent on credit scores, with excellent scores resulting in good rates and poor scores penalized with higher rates.
You can be denied a loan, credit card or mortgage based on a low credit score.
Employers and landlords are increasingly using credit scores as part of their assessment of candidates as well.
So a credit score can have all sorts of repercussions on your life.
Credit reports and scores can contain errors, however. A person with a similar name may have defaulted on a credit card, yet it shows up on your account.
So it’s really important to keep tabs on your credit. You need to get your credit reports and credit score regularly to assess their accuracy. Once a year is good.
Maybe you see multiple offers to get reports on your score, for a fee. There is no reason to ever pay a fee for this.
Here’s how to check up on your credit for free.
Credit Reports: Free by Law
Credit reports in the U.S. are compiled by three companies: Equifax, Experian and TransUnion.
By law, they must give you a free copy of your credit report if you request it. The U.S. Fair Credit Reporting Act (FCRA), backed by the U.S. Federal Trade Commission (FTC), mandates this. You can get a free one every 12 months.
If you want one more frequently than every 12 months, you will have to pay for the additional one.
So, how do you get your credit report? It’s easy. The three companies have established a joint method of contacting them. You can request the free reports through the web at annualcreditreport.com. You can also call toll-free to get it at 1-877-322-8228.
If you’d like to request your credit report by mail, fill out the Annual Credit Report Request Form and mail it to the following address:
Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281
Mail is likely to take longer than web or phone.
You will have to give your name, address, Social Security number and date of birth. You will likely also be asked some information known only to you so your identity can be verified.
If you find inaccurate information, you will need to contact both the provider of the information and annualcreditreport.com. It’s wise to check again to see that the information has been corrected.
One caution: Beware of sites that are set up to have variants of “credit report” and “free” in them. They are not the sites the FCRA mandates.
Credit Scores: Read the Fine Print
Now that you know what your credit reports say, how do you get a free credit score?
First, let’s cover what the credit score is. A credit score is a number from 300 to 850 that uses your credit report to give points in five categories.
You get an individual score in:
- Whether you’ve paid bills on time
- Amount of credit you use out of the amount you have available
- The length of time you’ve had credit
- Any new credit applied for
- Mix of credit used — student loans, credit cards, mortgages and so forth
You want to know the score first for the same reason you want your credit reports. If you’ve been reported as missing credit card payments but haven’t been, the correction of the credit report should show up fairly quickly in an increased credit score.
Second, knowing the score in each category allows you to see any deficiencies that are causing a low score. If you need to raise your score, you can make a plan to fix it. If, for example, you haven’t been paying bills on time, a firm commitment to get them in by the due date will raise your score.
Free credit scores are often offered by banks and other lenders. The key here is reading the fine print. If you have a bank credit card or loan statement, look at it carefully. You may have had your credit score all along and not realized it!
If you don’t see it but do have bank or other lender accounts, call and ask if you can get it for free. Many banks and credit unions offer this service.
Financial apps such as Mint will also often simply provide your credit score every month.
Two cautions here.
One, be wary of sites that claim to be offering free credit reports for a limited time. You may not be able to see the entire report until the time has expired. Sometimes the time is as little as seven days. They count on your forgetting, so they can charge you for the score.
Two, be careful with sites that offer free or low-cost credit scores, but bundle it with other services for which you have to pay. There is no reason to pay if all you want is a credit score.
Both credit reports and credit scores are easy to get for free. They are essential to your financial health. Invest some time in getting free reports so you’re an educated financial consumer.