Your credit score, that is. Your credit is often checked for reasons beyond just applying for a loan. If you apply for a job, an apartment, or an insurance policy, a company will probably look at your credit report to find out more about you. As a result, a strong credit report will benefit you in many areas of your financial life.
When was the last time you pulled your credit report? Generally, most of us only see our own credit reports when we apply for a loan. Unfortunately, at that point it may be too late to fix any mistakes. The time to view your credit report is before you apply for that loan or credit card.
You can obtain one free copy of your credit report from each of the three credit bureaus (Equifax, Experian, and TransUnion) once a year from annualcreditreport.com. Don’t be fooled by the catchy commercials for freecreditreport.com; its business is selling credit reports, not giving them away. To diligently monitor your credit report yourself, either get all three reports at the same time every year or pull one every four months.
It’s important to note that free credit reports will not list your credit score. You must pay for that information, usually about $20. A good site to purchase it from is myfico.com.
Most people who look at their credit reports for the first time find errors. You want to be sure everything on your report is accurate and up to date. It’s also important to look at all three instead of just one report, because each bureau collects and reports slightly different information.
What affects your credit report?
- The single largest element is your payment history. The best thing you can do to improve your score is to make all payments on time.
- The next biggest contributor is the amount of credit you currently have used. Don’t max out your cards, as this shows an inability to handle your available credit.
- The third largest factor is the length of your credit history. This is why young people should establish credit early.
- The fourth component is the amount of new credit you have received. Creditors prefer you to have older credit accounts, not a lot of new ones.
- The last element is the variety of your accounts. Your score will go up if you have a car loan, credit card, and home equity loan as opposed to three credit cards.
If you find errors on your credit report or need to recover from bad credit, don’t be fooled into using credit repair agencies or credit monitoring agencies. These are scams, and you would be paying them to do something you can do yourself. A detailed resource for more information is The National Consumer Law Center’s book, Guide to Surviving Debt. http://shop.consumerlaw.org/forconsumers.aspx
Your credit report says a lot about you. It’s a good idea to check it regularly and make sure it’s telling the truth.
Rick Kahler is a Certified Financial Planner™ professional licensed with a registered investment adviser that provides personal financial advice online for a flat fee.He is an author of four books on financial psychology and recognized by BusinessWeek magazine as one of the 15 most experienced financial planners in the nation. Contact Rick for help on virtually any financial need.