Get a report and analysis of your credit
It is very important to look at and understand your credit report. Why does this matter? For one thing, if you want to buy a house or get credit for another big purchase, you'll need a clean credit report. It's always best to get your credit report and analysis before your lender does. This will give you a chance to fix any mistakes or discrepancies, which are pretty common and can cause problems if they aren't fixed.
You should get your credit report and analysis from each of the three credit bureaus once a year at the very least:
- Trans Union at (800) 888-4213 or www.transunion.com; and
- Equifax - (800) 685-1111, http://www.equifax.com
- Bills can get them all at http://www.bills.com/creditreport
- Experian (888) 397-3742, http://www.experian.com
Each of these three credit bureaus must give you a free copy of your credit report and analysis once a year. You can get all three at once, or you can get them over the course of a year. If you get your credit report and analysis more often than that, each report won't cost more than $10, and in some states it will be much less than that.
If you were denied credit in the last 60 days because of something on your credit report, you can get a free copy of your credit report and an analysis of it. If a lender turns you down for credit, they are required by law to tell you about this right.
When you get your credit report and analysis, look over them carefully to make sure that all the loans and credit accounts listed really belong to you and that all the accounts listed as "open" have current loans or balances. If a loan you paid off or a credit card you cancelled is still listed as open on your credit report, you should contact the credit bureau and ask for it to be fixed.
How many different FICO credit scores are there, and what do they mean?
The scores on the FICO scale range from 300 to 850. Here are the ratings:
~ Excellent: Over 750
Very Good: at least 720
660 to 720 is good enough.
Not sure: 620 to 660
Dangerous: less than 620
How do they figure out my FICO score?
The formula used to figure out your FICO credit score takes into account a number of things:
35 percent based on how you've paid in the past
30 percent of the amount you owe lenders right now
15% based on how long your credit history is
10 percent of the number of new credit accounts you've opened or applied for (fewer is better)
10 percent based on how many different credit accounts you have (mortgages, credit cards, instalment loans, etc.)
Most of the time, when someone says "your credit score," they mean your current FICO score. But in reality, Fair Isaac made three different FICO scores, one for each of the three main credit reporting agencies in the US. There are different names for these scores.
WILL YOUR SCORES CHANGE?
The scores range from about 300 to 850 on the FICO scale. It's important to get a copy of your credit report and have it analysed so you know what your FICO score is. Fair Isaac tries to make the scores from the three credit bureaus as similar as possible. If all three credit reporting agencies had the same information about you, your scores from each would be within a few points of each other. But here's why your FICO scores might be different at each of the three credit bureaus. Because of how lenders and other businesses send information to the credit reporting agencies, your credit report at each of the three agencies may have different information. The agencies may also give different ways of reporting the same information. Your credit score can be affected by even small differences in the information at the three credit reporting agencies. Since lenders can look at your score and credit report from any of the three credit reporting agencies, it's a good idea to check your reports from all three and make sure they're all right.
When you get your credit report and analysis from the credit bureau, it usually comes with a form you can use to report any mistakes. Give as many details as you can, and if you have proof to back up your claim, give copies of those documents. By law, the credit bureau has to look into your claim about your credit report. Even if they decide that your credit report is correct as it is, you should still try to fix it by writing a letter (no more than 100 words) explaining your side of the story, which the bureau has to give to anyone who asks for your credit report.
When deciding whether or not to give credit, lenders look at the following:
- Your track record of paying bills on time.
- How much debt do you have compared to how much you can borrow? The worse it is, the closer your debt is to your credit limit.
- Have you recently tried to get more credit? If you apply for too much credit, your chances of getting it will go down.
- Has a collection agency been hired to get you to pay a bill?
- Do you have more than one credit account? Too many is seen as a bad thing.
- How long have you had credit? If you don't have much of a credit history yet, it's even more important to pay on time.
- Have you filed for bankruptcy before?
Your credit report keeps information about you for up to seven to ten years. If you have bad things on your credit report and analysis, you can slowly fix your credit by always paying your bills on time from now on, paying down your balances, and not taking on any new debt. Lenders will look at your better record when deciding whether or not to give you credit. This is especially true if you've been making payments on time for at least a year.
