The credit report.
Just hearing those two little words is enough send some consumers into a state of elevated anxiety.
What’s worse – it’s an involuntary reaction, it just happens! Even the best consumer out there with a perfect credit score will often experience those weird emotions when it comes to checking your credit report.
What if I forgot something? What if I’ve been the victim of fraud and something negative shows up?
There’s a myriad of reasons the ole stress meter registers hot, but the fact is – these are the exact reasons you should regularly check your credit report. We are living in a time when identify theft and fraud is at an all-time high.
The level of sophistication used by hackers and thieves has grown. The FBI and Department of Justice estimate that over 15 million – 15 MILLION – or about 1 out of every 5 Americans are victims of identity theft each year, a staggering number!
On this issue I think we all agree that we do not want to be included in that statistic. I’d prefer to stay in the “my identity is safe and my credit history is clean” group – thank you very much!
Fraud (or identity theft) can ruin that score and therefore cost you unnecessary money. Here are some surprising facts about your Credit Report that will help you save money. Because if you have more money, then you won’t need more credit.
1. Credit Scores Are Different From Credit Reports
Your Credit Score (also known as your FICO score) is calculated using the information found on your Credit Report. Your Credit Report is the listing of all the individual accounts that have loaned you money.
See, the day you start your very first credit account anywhere, you are entered into a huge database (actually three) that collects credit and other financial information on you – forever!
2. Your Credit Report Is FREE
Federal law requires the three agencies that have your credit data, Experian, Equifax and TransUnion, to provide consumers with one free copy per year (the rest of the year you will have to pay a fee which varies by agency). But you do not have to go directly to them to see your credit history.
An easy way to get a report from all three under one roof can be found at AnnualCreditReport.com, a FREE site sponsored by the three biggies.
3. Too Many Requests Won’t Hurt It
Does pulling your credit report damage your credit score? We’ve all heard that it “adds points” but never really sure.
The answer is no, well sometimes no and sometimes maybe! It really depends on what you are doing. Requesting your credit report too often doesn’t hurt your “score” but it might affect any new loans you are applying for. Creditors or potential lenders can see how many times your credit has been “pulled.”
For example, if you are applying for a mortgage loan, this will let them know you are shopping around and might help you get a better, competitive rate.
If you are trying to get a new credit card, this might send a red flag that you are desperate for money and cause your request to be disapproved.
4. Monitor Your Credit Report Every 4 Months
Instead of requesting your report once a year from all three agencies at the same time. We suggest you request the reports at four-month intervals. That allows you to monitor any changes more frequently, instead of checking in only once a year.
It’s easy too, when you go to Annual Credit Report, fill out your personal information and choose to view one report instead of all three. Then, four months later, log on again and choose a different bureau’s report to view. Put the reminders in your calendar right now. Set a reminder on your calendar and never forget to take advantage of your free credit reports again!
Your credit report is only updated by financial institutions every 30 days. So it really don’t change much from one month to the next. You definitely don’t need to pull it more than one time per month, and looking at it every 4 months is plenty to catch anything out of the ordinary.
The reason you check your credit report is to look for any new accounts you are unaware of. You are looking for fraudulent activity.
5. Your FICO Score Is FREE Too
Now, a nice little tidbit of warning here. Your free annual credit report from the “big three” will not contain your FICO score. What? After all that and still no score? It’s okay.
There are a couple website we can suggest where you can get that for FREE too. We have personally recommend and use CreditKarma.com and/or Credit.com. These are established and reliable sites for resources of getting your FICO score. They will not ask for Credit Card data when you create you account.
If you have a Discover card, your FICO score is listed on each months bill, or if you have no balance (go YOU!), just log in to your account and view it. They might also include what things may be on your credit report that are helping or hurting your score. Nice!
6. There’s An App for That
CreditKarma has a FREE App that features a summary of your credit report and your FICO score provided by Equifax and TransUnion. You can get daily updates on your credit health right on your phone or tablet and all without a dab of damage to your credit history! It will even notify you with fraud alerts. It is recommended by MSNBC, SmartMoney, Wall Street Journal, Forbes, TechCrunch, USA Today and us (the most important, right?).
Pulling your FICO monthly for this purpose does not lower your score as has been the fear in the past. You can request your FICO score from CreditKarma.com, Credit.com for free on a monthly basis and get recommendations on what actions are helping or harming your score.
7. Five Factors Impact Your Credit Score (FICO)
Simply put, FICO is a scoring system between 300 and 850 that was developed by financial institutions to analyze predictive behavior to determine profitability for the lender. Your FICO score is determined by these variables:
- Payment history (35%)
- Debt/Amounts Owed (30%)
- Age of credit history (15%)
- New credit/inquiries (10%)
- Mix of accounts/types of credit (10%)
8. Your Credit Score Can Cost You Thousands
High FICO = Lower Costs
A strong FICO Score is anything above 760. And it means creditors will offer you more “perks” to entice you to use their credit card (over competitors) and reduced fees (waived annual fees for example). Even employers have access to your credit report and having a good FICO score can lead to a new/better job.
Low FICO = Higher $$ Costs
If you maintain a low FICO, typically anything below 620, expect to pay thousands of dollars more in insurance premiums as well as significantly higher interest rates, higher deposits for things like cell phone accounts, utilities, water, cable, internet and just about any other service. Oh! Don’t forget higher security deposits for apartment or home rentals! Yep, if you mess around and wreck your FICO, everybody you do business with has access to this information and you can rest assured there’s a system in place to deal with it. The bottom line for you? Pay more for everything!
9. Stay On-Guard For Fraud: Be Proactive, Not Reactive
Remember that anxiety meter registering hot that we talked about earlier? How about this one for sending it straight into the red zone – that moment when you swipe your card and the payment terminal returns a prompt of “card declined” ? “I know I have money in the bank, so what’s up? Anxiously you try the swipe one more time just to be sure it wasn’t an error, but the prompt returns the same message. Talk about going from “happy girl, got all my coupon deals for cheap” to “RED ZONE, stressed out, race to the bank website” in about 3 seconds flat!
The single best piece of advice here is to be proactive, not reactive. What do we mean? Avoid being a victim. It is easier to avoid damage to your credit history than to repair it. Keep an eye on your open bank and credit card accounts at least weekly if not daily. It takes literally minutes to check your bank account online (or even from your smartphone or App) and you can identify when something isn’t right. Calling the bank the moment you see a problem is usually enough to take care of the problem and restoring your funds.
Super Low/No Liability with Credit
If someone steals your credit card number, but not your actual card (such as with a data breach), then you are not liable for a single dime. But you must report any fraudulent charges within 60 days. That means you need to look over your statements every single month to watch for any suspicious activity. In my case, the fraudulent charges were several small charges (amounting to $500 total), I’m sure they were “testing the waters” to make larger charges soon. By checking my statement regularly, I caught it before it got out of hand.
Aggravating Delays with Debit
When fraudulent activity happens on your debit card, your money is tied up in fraud research until they can determine you were indeed correct and refund your money. It can take longer to recover the money AND it costs around $50 right away. Granted that is a small price to pay… but you are still the victim. It is suggested that you use a credit card to make gas purchases ***and pay it off IN FULL each and every month**
9. BEWARE Of “Credit Clinics”
If you find that you were a victim of credit fraud (like I was in May), you might be tempted to find a service from someone who knows what they are doing and can fix it for you. These companies are commonly called credit clinics. They DO NOT do anything for you that you can’t do on your own for free. They cannot remove late payments, bankruptcies, or similar information from a credit report. So you would be paying for nothing.
The Federal Trade Commission is an excellent resource; go here and here to read their articles on Identity Theft so you don’t become a statistic too! They even have Sample Letters you can use to make it easy to clean things up.
10. Information Ages Off
I’ve had mistakes that I worried would ruin my credit. For example, we had a dispute over an emergency room visit. Different negative information remains on your credit report for different periods of time (except bankruptcy).
Generally, negative information automatically disappears from your report after 7 years.
Homework: Make Copies Of Your Wallet Items
We know someone who regularly (at least twice yearly) empties out her wallet – every card, and makes copies of the fronts and backs of every card, then files them in a secure location such as a safe or the bank safety deposit box.
It’s a quick backup plan to have in case an emergency happens, or if your purse is left or stolen (my Mother-In-Law once left her entire purse at Walmart… oh what a mess that was!).
Building and history are the key words to have good credit.
A good credit report has to be built over time, thus establishing a history. It doesn’t just appear.
All in all, if you pay your bills on time, don’t overload yourself with debt, protect yourself from fraud and be wise in your credit decisions, you really don’t need to do anything else to get a good credit score – it will come to you!
Your Turn: Do you have other advice to help build a good credit report history and high credit score? Post it in the comments section below!
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