Your financial situation depends on a single report. Here's how to get it.
Updated: Oct 22, 2021
One of the first things you need to know when it comes to your finances is how to check your credit score.
Your credit can effect your ability to make major purchases such as a house or a car. It also determines if you will qualify for a credit card or a loan. Some employers even check your credit score when you apply for a job, crazy right?
Since credit impacts so many other areas of your finances, it is important to be aware of what is on your credit report, and to know your credit score.
There are three main credit bureaus:
Experian
Equifax
Transunion
Each one determines your credit score in a slightly different way. When you apply for most credit products, they will usually take an average of your credit scores from all three bureaus.
Credit Report Vs. Credit Score
Your credit report is a list of all of your creditors that report to the credit bureau. It will include any credit cards, loans, and any collections. A collection is a bill that has been reported as being unpaid.
Using your credit report, the credit bureau will determine your credit score. They use a formula that combines the following factors:
Amount of Outstanding Debt
On Time vs. Late Payments
Credit Utilization
Age of Accounts
Amount of Credit Inquiries
Different bureaus will weight each factor slightly differently. But all of them will reduce your credit score the most based on late payments and collections.
How do I get my Credit Report & Score?
If you have a major credit card, there is probably a section of your app that will tell you your credit score. It may also be on your statement. Make sure that if it does tell you a credit score, that you look to see if it is your FICO score. This is the score that mortgage lenders use. There are other types of scores, but they are not very useful. If you go to a mortgage lender and give them another type of score, it can be very misleading, and you may not end up qualifying for a loan when you thought you would.
If your credit card doesn't show your FICO score, not to worry!
To get the official 3-bureau credit report, you can go to www.annualcreditreport.com and request it. Everyone is allowed to request a copy of their credit report once a year. You are also allowed to request your credit report if you have other things happen, like being denied credit. The only problem is, that the free credit report doesn't give your credit score. They make you pay for it.
However, you can check your credit score for free on several different websites. But again, be wary, as some of these are not very accurate. In my experience, the score that you get from www.creditkarma.com is going to be the closest to your FICO score. They also will give you tips on raising your score, although many of these will involve applying for new credit cards. I would advise not applying unless you actually want a new credit card!
I have my Credit Report, now what?
Once you have a copy of your report, verify everything is correct. In other words, make sure all the bills on there are bills that you actually have.
If there is anything on the report that you don't recognize, this may mean you have been a victim of identity theft. If this is the case, you will want to call your bank right away to notify them.
After that, you will need to dispute the items on your credit report that are in error. To do this, you will need to go to each credit bureau website, and follow their directions for disputing an item on the credit report. You will usually receive a response in about 30 days. If they don't remove the item from your credit report, you may need to provide additional information.
Once you have done this, you will be well on your way to having your financial future in hand!
What if my credit score is bad?
If your credit is bad, then you will want to determine the reason for this. If it is due to identity theft, that is pretty self-explanatory, and should sort itself out once you dispute the fraudulent items.
There are several other reasons you could have a low credit score, and Credit Karma is useful for determining that as well. If it is because of late payments, then make sure you start to make payments on time. You need to have about a year worth of on time payments to bring up your score.
If it is because of collections, then you will probably want to dispute those on your credit report as well. Or, you can work with the collection agencies to settle them off of your report.
Here are some helpful tips that present a variety of ways to deal with collections:
There are really only two other reasons your credit score would be low. First, is if you have little to no credit history. That is not a bad place to be in, it just means that you need to build up your credit.
The other reason is if you have high credit utilization, that means, most of your credit cards are probably maxed out. There are a couple of things you can do in this case. First, you can just make your normal payments and wait for your score to go up as your credit balance goes down.
Or, if you are in a bit of a hurry, you can reply for a credit limit increase on your cards. You would still owe the same amount, but you have more available credit. That will make your score go up. The only problem with this method is that, depending on your score in the first place, you might not qualify.
These tips should get you started with understanding your credit. Is there anything you want to know more about? Let me know in the comments, and I will post again soon!
