Do you know the difference between your credit report and your credit score?
Your Credit Report
Your credit report includes information on your address, Social Security number, employment information, how you pay your bills, and whether you have been sued or have filed for bankruptcy.
Nationwide credit reporting companies sell the information in your report to creditors, insurers, employers and other businesses that use it to evaluate your applications for credit, insurance, employment, or renting a home.
Under federal law you are entitled to receive one free credit report per year from each of the three major credit reporting companies – Experian, Equifax and TransUnion.
To get your free credit report, visit www.annualcreditreport.com or call 877-322-8228. You can also complete their credit report request form and mail it to: Annual Credit Report Request Service, PO Box 105281, Atlanta, GA 30348. You should not contact the three reporting companies individually.
Beware of websites that claim to offer “free credit reports.” They come with strings attached. Usually, they will offer a “free” service, but then after a trial period they will automatically sign you up for a service with a monthly fee.
Why would you want a copy of your credit report?
Information on your credit report affects whether you can get a loan and how much interest you will pay. You want a copy of your credit report to make sure the information is accurate, complete, and up-to-date before you apply for a loan (house, home improvement or car), buy insurance, or apply for a job.
It can also help you guard against identity theft. Someone who uses your personal information to commit fraud may open up a new credit account and then not pay the bill. This will show up as a delinquent account on your credit report. If there are mistakes on your credit report, you can correct them.
For more information: http://www.consumer.ftc.gov/articles/0155-free-credit-reports.
Your credit report does not include your credit score.
Your Credit Score
Your credit score is a number that is used to predict how likely you are to pay back a loan on time. It can significantly affect whether you can get a loan and how much interest you will pay on the loan. It can also affect the credit card interest you will pay.
Your credit score starts with the information about you from your credit report. A mathematical formula – called a scoring model – is then used to create your credit score.
There is no “one” credit score because there are many credit scoring formulas used by lenders and they will depend on the data used to calculate it.
Most scores range from 300-850.
Getting your credit score is not free. You can purchase it from one of the three largest credit reporting companies:
- Experian – www.experian.com (800-685-1111)
- Equifax – www.equifax.com (888-397-3742)
- TransUnion – www.transunion.com (800-916-8800)
How to Improve Your Credit Score
Here are five tips:
- Always pay your bills on time.
- Pay down your credit card balances and keep them low. Don’t use all of the available credit on your credit cards. The lower your utilization rate, the better your credit score. To calculate your rate, divide your total credit balances by your total credit limits. Try to keep your utilization rate below 20%.
- Eliminate small balances. It’s better to have a larger balance on one credit card, than small balances on a number of credit cards.
- Leave old debt and good accounts on your credit report. A history of paying off debt will improve your score.
- Don’t close old credit card accounts. The longer your credit card history on all your credit cards, the higher your score.
Tom Copeland - www.tomcopelandblog.com
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