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 monitoring apps.
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.
Here are the top 12 frequently asked questions on credit reports and credit scores:
1. What is a credit report?
A credit report contains personal information such as your name, address, list of employers, credit inquiries, history and the status of your credit accounts. Account information includes your payment history, number of credit accounts, credit limits, and credit used, and any collection accounts or judgments and liens.
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 entitled to a copy of your credit reports once every 12 months from each bureau.
3. What is a credit report inquiry?
Credit inquiries are records created when someone looks at your credit information. There are soft inquiries that don’t impact your credit score and hard inquiries when you 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 banks, credit unions, credit card companies offer their customers access to free credit scores. Additionally, you can get free credit scores with services offered by many fintech companies like Credit Karma and Credit Sesame. Get your free score with these apps.
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. Apply for credit with a reputable creditor such as your bank or credit union. You may be required to open a secured credit card or you can look at credit builder accounts.
7. Is my credit score good or bad?
Your credit score is a 3 digit number that falls within a range created by companies like FICO or VantageScore. For example, FICO’s credit score range is between 300-850. Have a score between 300-450, then you’d be considered to have “very poor” credit. Now, if you’re credit score was 750, you’d be considered within the “Very Good” to “Excellent” range. With scores, it’s more important to know where you fall in the credit score range.
8. What factors impact my credit score?
There are many algorithms used to generate any number of credit scores. However, public knowledge about FICO scores indicates they use five factors to calculate your credit scores. 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. 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. So the goal would be to improve the accuracy of your report and have as many positive tradelines reflected. Learn how to improve your credit score.
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 confirm the information or remove the inaccuracy.
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. You must file a dispute with the credit bureaus for any information that is inaccurate.
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 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 to review your credit report first and ensuring the information reported is accurate.
Finally, let me emphasize that 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 to fix your report. Or you can hire a credit repair company.
I highly recommend you read the fine print before choosing to work with any credit repair company. Be cautious of any services that offer quick resolutions and immediate fixes to your credit. The credit repair service industry is highly regulated by the Federal Trade Commission (FTC).