Credit reports and credit scores are one of the most well-known but still mysterious parts of personal finance. There are millions of articles and resources on the internet helping people understand credit yet many are still left confused. I can’t blame them because there often seems to be contradicting information from one website to another.
Just recently in my Facebook group, a financial wellness roadwarrior asked how he could get his free credit score and a member responded with AnnualCreditReport.com. I corrected the response and directed the roadwarrior to one of the many free credit report monitoring apps. He responded that he was indeed looking for the AnnualCredit Report.com website because he wanted to get free copies of his credit report, not his score.
The reality is that most people continue to interchangeably use the term credit report and credit scores synonymously. They are two distinct and different things. I realized, then, I needed to continue to educate the group and my readers about credit, credit reports, and credit scores.
1. What is a credit report?
A credit report contains information about your credit history and the status of your credit accounts. This information includes how often you make your payments on time, how much credit you have, how much credit you have available, how much credit you are using, and whether a debt collector is collecting on any debt you owe.
2. Where can I get a free credit report?
So here it is, there is only one federally mandated website where you can access all 3 credit bureau reports for free. The website is AnnualCreditReport.com. You’re allowed access to each of your credit reports once every 12 months.
3. What is a credit report inquiry?
Credit inquiries are records created when someone looks at your credit information. There are soft inquiries (made when you or your creditors you have relationships with review your credit report) and hard inquiries (made when you specifically apply for credit or a loan).
4. Will requesting my credit report hurt my credit score?
Requesting your credit report will not hurt your credit score. Checking your credit report is not an inquiry (or application) for new credit, so it does not affect your score.
5. How can I get access to free credit scores?
There is an increasing number of ways you can get free credit scores. Many financial institutions like USAA or credit card companies like Discover Card or a growing number of financial services companies like Credit Karma and Credit Sesame offer people access to free credit scores.
6. How do I build a good credit score?
Building a good credit score takes time. If you’ve never had credit it will take a year or two to establish yourself as a responsible borrower to lenders. To build good credit you’ll need to have open credit accounts, maintain low balances compared to your credit limit, and make on-time payments every month. You can request to have one of your credit cards limit increased improving your credit utilization or use a credit builder program.
7. Is my credit score good or bad?
Let’s start with the understanding that there are credit score ranges. There are many credit scores used but most follow a system developed by FICO. FICO is a company that created the original credit scores using their proprietary algorithm. What’s most important to know about your credit score is where you fall within the ranges. For example, FICO’s credit score range is between 300-850. If you fell between 300-450, then you’d be considered “very poor” credit. Now, if you’re credit score was 750, you’d be considered within the “Very Good” to “Excellent” range.
8. What factors impact my credit score?
Again, there are many algorithms used to generate any number of credit scores. However, public knowledge about FICO scores indicates they use five factors. These five factors include Payment History (35%), Capacity (30%), Credit History (15%), Credit Mix (10%), and New Credit (10%)
9. What can I do to improve my score?
Credit scoring systems are complex and the credit scores used by creditors can vary greatly. If a factor changes, your score may change but the change can also be influenced by other factors. As you can see it can get quite confusing. What’s important is the accuracy of the information found in your credit report. The information found in your credit report is what determines your credit score. Lots of negative information can lower your score. There are ways for you to improve your score and a general tip won’t address the uniqueness of your situation. However, companies like CreditRepair.com offer services to help with your specific credit report issues.
10. How can I fix inaccuracies on my credit report?
By federal law, you have the right to accurate credit reports but it is up to you to ensure the report is accurate. When you find inaccurate information on your report, you can start the dispute process directly with the credit report agency–Experian, TransUnion, and Equifax. The credit bureaus are required to investigate your claim and will remove the inaccuracy or confirm the accuracy of the information.
11. How long can a reporting agency report negative information on my credit report?
Credit bureaus can report accurate negative information for up to seven years and bankruptcies up to 10 years. If the negative information found on your report is inaccurate, they are required to remove inaccurate credit information.
12. Are there ways to repair my credit report and boost my credit score quickly?
The answer is–it depends. Your credit score may be low because you’re young and have a minimal credit history. Or it may be low because you have too much debt or collection accounts or a history of late payments. Depending on your credit situation and the information found on your report, you’ll need to take different actions to repair your credit and boost your score. The first step is always reviewing your credit report first and ensuring the information reported is accurate.
Lastly, I’ll repeat this, you are responsible for ensuring the accuracy of the information found in your credit report. When you pull your credit report from AnnualCreditReport.com and find inaccuracies you can DIY or hire a credit repair company, but I highly recommend you read the fine print before choosing to work with any credit repair company. The credit repair service industry is highly regulated by the Federal Trade Commission (FTC). And be mindful of any services that offer quick resolutions and immediate fixes to your credit score.