Although I’m normally a person that likes “free” anything, in the case of my credit report I think it is best that you consider what information you are getting and what information you will not see. While reviewing your credit report is important, it can be overwhelming to most consumers. Nonetheless, you should still review the report annually.
A smarter decision for consumers, is to monitor their credit scores each and every month.
Why would I advise this?
Because your credit score is often the underlying factor a lender judges you by for extending credit your way.
The Difference Between Your Free Credit Report & Credit Score
A credit score is simply a number that represents a current evaluation of your credit history that is available within your reports. It is a “cliffnotes” version of your overall credit file. Clearly, this helps consumers quickly digest and evaluate their credit situation. Banks and lenders use the score to decide quickly if you are likely to repay an account or loan, without having to carefully review the credit report on which it is based.
Ideally, you want to improve your scores over 720 because if your score is high, you are likely to be offered credit at good rates. If your score is below the creditor’s threshold for routine approval, it might reject you or charge you higher rates or fees. In the long run, this could potentially cost your tens of thousands of dollars on a loan.
Since your credit scores are based on your credit reports, even more important than knowing your credit scores is knowing what is in your free credit report gov. If you want a better credit score, you need to deal with what is in your credit report.
Credit Report Basics
Credit reports are statements made by credit reporting agencies that document all financial activity for you. Reports might consist of details about a customer’s credit history, worthiness, current standing, credit capacity and payment history. Whereas some lenders will evaluate your credit report directly, others may only evaluate a credit score based on your report. The majority of lenders will review both your credit report and one or more of your credit ratings.
Credit reporting agencies are normally for-profit companies that gather and offer details about an individual’s credit history. All creditors supply information about their accounts making use of a requirement or an electronic reporting system. You may hear it referred to as “Metro 2.” It has a variety of “fields” (that is, boxes or blanks) in which the creditor might place information about you and your credit.
There are three credit bureaus that you need to be aware of because your credit score or FICO score can vary from each bureau. Do not rely on just one for all of your information. Some lenders only report to one while others may report to all three. You are better off to pull each score and check for major problems before you need to apply for a loan or even before you apply for your next job.
P.O. Box 2000
Chester, PA 19022
P.O. Box 2002
Allen, TX 75013
P.O. Box 740256
Atlanta, GA 30374
Keep in mind that each bureau uses a modified version of the Fair Isaacs scoring method. It is important to know that each bureau uses a slightly different scoring method because scores will be different. They all weigh the report about the same as far as what is important and what is less important. Equifax has the BEACON system, Experian has the Experian/Fair Isaac Risk System, and TransUnion has the classic FICO Risk Score system.
The Credit Score Scale
Credit scores typically range from 300 to 850. Anything below 600 is considered poor credit. Scores over 715 are a great sign of your credit worth and qualify for the best rates.
What Not To Do
Do not fall for that silly television commercial about a ‘free credit report’. It is actually anything but “free” and furthermore, it is just a guesstimate of your actual credit standing. It amazes that their company is still around and the amount of confusion they cause for consumers is overwhelming.
What You Should Do
If you still think you only want to see your free credit report from the government and not your actual scores, head on over to www.annualcreditreport.com. In my opinion, you are much better informed if you look at the reports and monitor your scores with a credit monitoring service.