With companies increasingly relying on credit reports to check the worthiness of both customers and possible employees, it has never been more important to keep tabs on your credit report.
People often use the term credit report and credit score interchangeably. However, these two items are completely different.
What is a credit report?
Your credit score (called a FICO score) is a snapshot of your credit through a weighted average of various debt related statistics. These include:
- Payment history
- Amounts owed
- Length of credit history
- New credit
- Types of credit used
To learn more about how a FICO score is calculated check out myFICO.
Another thing that should be noted about FICO scores is that they are not free. Some sites may claim to give you a “free” FICO score but make sure you read the fine print. Often these sites require you to register with a credit card. You get a “free” score, however you usually are enrolled in some program that will charge you after a certain grace period has expired. You may be able to opt out of this contract, but if you do decide to go this route check the fine print.
Rather than a snapshot of your current credit status, a credit report shows a more in depth view of your credit history. The information in a credit report includes:
- Personal information:
- Name
- Address
- Social Security Number
- Types of credit you have:
- Revolving credit
- Unsecured credit
- Secured credit
- short-term loan
- How long the credit has been opened.
- Have bills been paid on time?
- The amount of credit currently used. Your credit limit.
- How many inquiries have been made in your report. (Every time you need new credit your report is checked. You can use this as an indicator to see if any suspicious inquiries have been made.)
- Bankruptcies, foreclosures, ect…
Get Your Reports Annually
By law, everyone is entitled to a free credit report at least once a year. There are plenty of sites where you can get this report. The site I use is Annual Credit Report. Annual Credit Report gives you an opportunity to check the three major credit report bureaus:
- Experian
- TransUnion
- Equifax
While there are others, these are the bureaus that major institutions use to determine your credit worthiness.
What I do With My Reports
Since you can only request a report once a year, I spread out the requesting of my reports. Ever four months; January, May and September, I request a report for me and my wife from one of the bureaus. It’s important to remember that because you can only request a report once a year, you must wait a full 365 days before asking for another free report. I always write down the date and the bureau I request the information from. That way I know when to request the new report.
There are two reasons my wife and I check our reports. First, it helps us to ensure that our personal information has not been used to open new accounts. Second, it allows us to check for inaccuracies. While accurate information, no matter how unflattering it is, cannot be removed from a report it is important to request that inaccurate information is removed. For more information check out Free Credit Report’s: Fraud Alert.
How do you ensure your credit is safe?
Photo Provided By: Don Hankins
I am not a financial professional. The opinions for included in this article are mine alone and meant for entertainment purposes. Check with a professional before making any major financial decisions. For more information check out our disclaimer policy.
Credit is so important when it comes to qualifying for loans so I agree that it’s incredibly important to regularly check your credit report and make sure everything is accurate. A nice reminder for the new year!
DC @ Young Adult Money recently posted..The Advantages of Being a DINK (Dual Income No Kids)
You’re absolutely right DC. You can’t fix something if you don’t know about it.
We get our reports at generally the same interval. They’re free and fairly easy to get so it’s a no brainer for us. I am a Jr, so I’ve had several of my Dad’s accounts show up in the past so it’s important for us to get it cleared up.
John S @ Frugal Rules recently posted..Why I Don’t Believe in New Year’s Resolutions
That’s a good point. I’ve got a friend who refused to have their son be a Jr. for the very same reason. Her brother was a Jr. and his credit score was messed up because of their father.
It is such a good idea to check your credit at least annually. I found a few mistakes on my report before and successfully disputed them!
Holly@ClubThrifty recently posted..Can You Afford to Live Until You’re 90?
If you plan on getting a new job, buying insurance or using credit those mistakes can cost you. I’m glad that you had success with those issues.
Checking credit reports are super important. Your post actually just reminded me that I need to check mine to see if there are any issues. Thanks Justin!
Grayson @ Debt Roundup recently posted..The Many Perks of Banking Online
It is so important to check your credit and make sure that there is nothing odd on it. We just refied, and for some reason, my dad’s mortgage was showing up on my credit report (we have the same name). It has never happened before, and was an easy fix, but hey, random things do happen.
The College Investor recently posted..Best Online Tax Software: TurboTax Online vs. H&R Block Online
I’ve heard that there are often mistakes with Jr.s. I suppose for Jr.s it’s even more important to check the report to make sure their parents aren’t inadvertently ruining their children’s credit.
Nice post. As someone who has been a victim of identity theft I highly recommend you check your reports often. Also, consider freezing your credit as it is the best way to protect your information.
Kyle James | Rather-Be-Shopping.com recently posted..My Best Finance Tip for 2013 + a $100 Cash Giveaway
In most jurisdictions, a credit report can be obtained for little or no fee. I’m continually surprised, even after working almost my whole life in the finance industry, that people are just not aware that credit reports even exist! Yet, to all financial institutions, especially here in Canada, credit reports are reviewed virtually all the time and is used to make important lending decisions! Cheers, Pat.
Pat Drummond recently posted..Free Credit Report Canada: 3 simple ways to get a free report and score