Basics of Credit Score and Credit Report and How often to Check

If you are getting a loan, a mortgage or applying for a credit card your credit score will play a big role. Credit reports have become increasingly more important over the years, and more lenders pay more attention to borrowers’ credit scores. Your Credit score will help the lender determine if you are suitable candidate for a loan, set your interest rates and your terms of repayment. The better your credit score is the better terms and interest rates you can get from the lender as you will present lower risk to them. However, your credit score is not the only factor that will determine the outcome of your application, other things such as your assets, income and job stability are also important facets. Even potential employers are checking prospective employees’ credit reports before making an offer.

Basics of Your Credit Report

There are mainly three main agencies that provide credit reports, Equifax, Transunion and Experian. Each of these agencies will provide a slightly different score due to the different methods they use to calculate your scores. There are several things you will see on your report:

1. FICO Score – Your FICO score is a numeric value that is calculated based on many things including your payment history, amounts owed, length of history, types of credits used…, etc.

2. Your credit report will also have your personal information such as name, address, employer and social security number.

3. The products you have such as your credit cards, lines of credit, non-revolving loans will also be included. As will the limits, outstanding balances and your payment history (if you have ever missed a payment it will be in here).

4. Credit report will also include if any item has reached a collection agency or if there are/were any judgments against you in the last 6 years. Bankruptcies will also be included in your report if it was within the last six years.

5. Finally it includes all inquires into your credit report within the past few years.

Whenever a lender, or anyone you have given permission to, accesses your credit report they will see all this information about you.

How Often to Check Your Credit Report?

You can see the importance of your credit score and your credit report, small inaccuracies can have huge impacts on your life. That’s exactly why it is so crucial to check your credit report on regular bases, I always recommend checking your credit once every quarter – this way if there are any inaccurate information you can fix it before it is too late. Another reason why regular credit checks are important is Identity theft, millions of people fall victims to ID fraud and by the time they find out it is too late. By regularly checking your reports you will be able to identify anything suspicious and take care of it immediately.

How often do you check your credit report? Do you have any horror stories about people falling victim to ID fraud or inaccurate information?

9 Responses to Basics of Credit Score and Credit Report and How often to Check

  1. I agree that checking credit report every three months is very important. One more thing to note though is that opening multiple applications could also pull down you credit score.

  2. I try to check my credit report 3x a year and check my wifes the same amount. They key is to alternate reports, so that you’re checking on of them every 2 months. This past year, I’ve gotten a little behind.

    I got a call from one supposed creditor who claimed we owed some money. After a couple of months of arguing back and forth, they cleaned up the credit report. It took some determination on my part and a couple of letters. They kept wanting me to prove that I didn’t owe it, I simply asked them politely to prove that I did. I never figured out what the bill was for.

  3. Great Blog Post, with lots of useful info. I just want to rehighlight the part about checking your credit score. It is so important that people do this in order to understand how their financial health is doing and to protect against possible Identity theft.

    Great Job!

  4. Excellent advice, although I think checking your credit every three months might be a little bit excessive. Every six months or so is plenty often, depending on your spending habits.

    It’s also worth mentioning that you have the right to receive a free credit report if you have been denied credit within the last 60 days. It’s worth taking advantage of this opportunity if you’ve been turned down for a loan or credit card recently.

  5. Majority of the consumers do not regularly check their credit reports. Most people usually give their credit reports a look when they are applying for a job, a loan, or a mortgage. But ideally, you should check it once year; better yet, checking it twice a year is more prudent. This way, you get to have regular updates n your credit report and protect yourself from identity theft at the same time.

    You might think that every time you call to inquire about your credit, it is included in your credit rating. That is not the case, really. If you inquire about your own credit, your credit score is not affected.

    Inquiring about your credit is called a soft inquiry and it does not have any effect on your credit score.

    The main reason why you should always check your credit is not because you want to apply for a loan or obtain credit. Regularly checking your credit file enables you to detect early signs of unscrupulous data in your file. It’s the same when you want to protect yourself from identity theft. If you regularly check your credit records, you can easily detect if there are abrupt changes in your file.

  6. Yep…even if you believe you have great credit, reviewing your credit report on a regular basis is a wise thing to do. Finding inaccuracies and fraud early can save you from major headaches further down the line.

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