Your Guide to Obtaining a Credit Score and Full Credit Report
Checking your credit score and your full credit report in a regular manner is important if you want to apply for a loan, mortgage or apartment.
It is also important if you are applying for a new job, as employers have the right to check your credit. Knowing your score will give you a better idea of how much credit you may qualify for. Furthermore, monitoring your report and credit activity is a preventative measure for identity fraud.
A credit report is different from a score because it lists your full credit history. This history includes the number of credit lines you have open, how often you pay back your debt on time and whether you have filed for bankruptcy or gone through foreclosure.
A credit score, on the other hand, may not give you as detailed information and usually comes from just one of the three major credit bureaus. You may receive credit scores and credit reports for free by contacting the right companies or requesting reports from the correct website. You also have the option, however, of purchasing additional credit reports from each of the major companies.
What You Should Know About the Three Reporting Companies
There are three credit reporting companies that most U.S. lenders use to check your score: Equifax, Experian and TransUnion. If you are a credit card, loan or mortgage applicant, it is likely that you have already checked your score with data provided by one of these three companies. Each of these credit bureaus will collect certain information about you to determine your score and develop your report.
The information that impacts your score includes your payment history, the debt you owe versus the amount of credit available to you, the length of your credit history, the number of accounts you have open and what types of debt you have.
In general, your payment history is the most important aspect of your report. This is because it gives lenders the best prediction of how often you will pay your bills on time.
While every reporting company gathers similar information on your credit, each one uses its own formula to calculate a report. Consequently, a report from one company may look very different from that of another company.
You may also find errors on one report that do not appear on another. Furthermore, a lender who checks your score may use only one company’s data or it may use data from all three credit bureaus. Thus, it is important for you to check your score with all three companies.
You may receive a free copy of your credit report from Equifax, Experian and TransUnion once per year. If you go above this allotment, you may be required to pay a fee. Keep in mind that reports are not offered directly through each individual company, but through one website.
When and Where to Obtain Your Free Credit Report
Once every 12 months, you are entitled to one free credit report that gives you information from the three major reporting companies. Alternatively, you may order one report from each company once a year, instead of receiving them all at once.
You may qualify for an additional report if you have recently been denied by a lender, are unemployed, receive welfare or are unfortunately experiencing identity theft. If one or more of these circumstances applies to you, must put in your request before 60 days have passed. Requesting a report at any other time, after you have received the maximum number of reports for the year, will result in a fee.
The Annual Credit Report website is the only site authorized by the federal government to distribute credit reports. On the site, you may request one report at a time or all three at once. You may want to stagger the reports if you want to monitor your score on a more regular basis.
If you are applying for a very large sum of money, however, you may want to receive all three reports at the same time so that you know exactly what credit information your lender will see.
Submitting a request for a report requires you to provide certain personal information. For instance, you will need to enter your name, address, Social Security Number (SSN) and date of birth. The Annual Credit Report site may also prompt you to answer questions about your loans, mortgage payments or other applicable debts in order to prove your identity.
If you wish to buy additional copies of your reports, contact Equifax, Experian and TransUnion directly by telephone or through their websites. This option may benefit you if you feel the need to monitor your reports as closely as possible. The fee for each report may vary.
Why it is Important to Monitor Your Credit Report
Keeping an eye on your credit report will give you a better chance of spotting errors in your personal information and credit history. If your information is incorrect or needs to be updated, you may contact any of the three reporting companies or submit your update through the Annual Credit Report website. You may need to update your information if you have recently gotten married, moved to a new home or went through a similar life change.
Monitoring your report will also give you a better chance of combating identity fraud. An identity thief steals your SSN and banking information to apply for a new credit card under your name. He or she may then use the new card to withdraw large sums of money or make expensive purchases.
This may result in a significant drop in your credit score and hurt your chances of receiving approval for future loans. If you notice the signs of identity fraud early on, you may be able to prevent some or all of its negative effects.
Will your credit score be negatively impacted by an inquiry?
Your credit score will not be impacted by soft inquiries, but it will be altered by hard inquiries. Checking your own credit score is considered a soft inquiry. Potential employers and companies may also order a soft inquiry if you are applying for a job and they want to perform a background check.
Hard inquiries take place when a financial institution, lender or even a rental association wants a detailed explanation of your loan or credit history. This type of inquiry will lower your credit score by a few points and be recorded on your report. If you undergo multiple hard inquiries in a short period of time, your score may be significantly depleted.