You can read about what credit is in general in this entry here: http://walkerandwhite.blogspot.com/2012/09/diy-credit-in-general.html
Free Credit Report.com may not be the best website out there for reading your report, and there are ways you can get your report free directly from the credit bureaus, but I highly recommend running a freecreditreport.com report at least once.
It explains every little thing and what it means, specific to your situation. While it doesn't go into a lot of depth, hopefully this guide and their tips together will give you a good starting point to understanding how to use your credit to your benefit.
By law, you can request one free credit report from each of the three credit bureaus. Many people choose to check one of these every 4 months, so they spread their free reports throughout the year.
I personally choose to pay for my report through FreeCreditReport so that I can check in weekly to see how different spending habits change my account, and because I had a personal experience with a false negative. I would rather pay every month so I can see what is happening under my name, in case anything false ever comes up again, and because I am in the process of making large financial decisions I need to prepare my credit for. I wish I would have done this sooner, I would have been prepared earlier.
The three credit bureaus and links to their free report process:
Experian: http://www.experian.com/credit-advice/topic-get-credit-report.html
Equifax: http://www.equifax.com/answers/request-free-credit-report/en_cp
TransUnion: https://disclosure.transunion.com/dc/disclosure/disclosureCRPricingDtls.jsp
FreeCreditReport.com --- It seems a little tricky, but it really isn't, and I'll talk you through the whole thing. Go over there, suck it up, and sign up. No, it's not free. Your first report will cost you $1. You then have 7 days (it'll tell you exactly how long and how much in the blue bar at the top of the site) to cancel your membership or you'll get charged the first month membership price, and it will continue to charge you every month. I personally think that $16.99 is way too much to be charging for one damn report. So, I called in to cancel my membership, told them this, and they dropped the price down to $8 a month.
Calling Free Credit Report.com: 1-877-481-6826.
Monday-Friday from 6 a.m. to 6 p.m.,
Saturday-Sunday 8 a.m. to 5 p.m. (Pacific Time)"
I figured I could scrape together $8 a month to continue to pay for something this important. And if you can't, there are options. You can do run the FreeCreditReport $1 version, cancel membership before 7 days and check back every few months. Or do this once to learn, and then rely on the free reports directly from the bureaus. Or of course, just read this for the information about credit in general and rely on the free reports. Lots of ways, no excuses not to look into it. ^_~
But, for now... with FreeCreditReport . Com.
- So, now you've got your membership, you've called in and got the cheaper price, and now you're looking at your online page. You'll get this page first. (below) Skip it every time. Just click "No thanks, take me to my new homepage." You get a copy of all three credit bureaus' reports every three months through this site, you don't need all three all the time.
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| Skip this page every time. You get the "3" included in your membership every three months anyway. |
There are a few really great features to this website. Your home page is a great place to start. You can see a bar across the top with different tabs that will show you different aspects of your credit in short form. There are also a set of tabs about halfway down the page that are very useful. Read each tab, it'll teach you a little about your credit. And don't freak out if there is negative information, it's okay. You can either dispute it if it's false, and fix it over time if it's true. It is not the end of the world, and don't let it make you feel like giving up or "it's no use to pay attention to credit since it's messed up already." It is even more important to pay attention to it if your credit score isn't great or if there are negative reports. How else will it improve?
Free credit report. com really does a great job with teaching you about credit. It explains a lot of "why this is, and why that matters" on almost every tab. I've circled the most important tabs on the home page in the photo below.
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| free credit report.com home page, with important tabs circled in yellow. |
- Credit and Debt: "Two of the most important figures lenders consider when you apply for a loan are your total debt and the amount of credit you have available. Having credit cards does not hurt you, but maxing them out does." Having even a large balance on your credit cards can hurt you. It hurts your Revolving Credit (the amount you have spent on your credit card) - to debt (the amount you have available to spend) ratio. This ratio is shown in that circle/pie chart there. Revolving Credit to Debt ratio shows banks, ect, that you have money available to spend on your credit cards in case of emergency. In case something happened, they want to know that you'd have money to pay them/your bills via credit cards, ect, and that they wouldn't get screwed over as much if something bad happened. If your credit cards are maxed out, you not only don't have emergency fund, but you also owe even more money to other people which isn't a great thing when it's credit card debt. (installment loans like your school bills actually help you, whereas credit card debt hurts you)
- It is a great idea that if you do use your credit cards to pay them off by the Statement Date every month -- not the Due Date. Yes, they HAVE to be paid by the Due Date, but if the Statement date is a few days earlier, pay it before that date. Why? Because the date the credit report pays attention to is the Statement Date. It doesn't care when the due date is, as long as you pay it. The Statement Date is when the report goes in and checks your balances. So let's say you want to get a car loan on the 20th of the month, and your statement date is the 14th, while your due date is the 17th. Le'ts also say that you owe $300 to your credit card and plan on paying it off before you apply for your car loan. If you pay it off by the statement date, it will show up on your credit report on the 20th as paid off, which literally raises your credit score number and improves your credit-to-debt ratio, which means it's more likely you'll get approved for that car loan you want. BUT, if you pay that $300 on the 17th, it won't make it onto this month's report, even though you paid it. So when you apply for the loan on the 20th, your score won't be as high and that could hurt your chances at getting the best interest rate for that car loan, or even that car loan at all.
- Negative Information: This is the part that hurts a bit. This will tell you if you've ever made a financial mistake, or if there is a case of identity theft, or a false negative reported mistakenly by a business.
- If there is anything on there that you don't recognize, you can dispute them through the three credit bureaus as well as to that company directly. (For example, I had a false report from Verizon stating that I failed to pay - which pretty much means I either don't get any loans, or I have to pay a really high interest rate as a result. This was a false report, I had paid, and in time, they had sent me to collections anyway even though I had already paid them months before. It was an error. I had to email and physically write to everyone involved to get it resolved - Verizon, Experian, Equifax, and TransUnion.)
- If there are things on there that are mistakes that you made financially, you now know about them and can work on fixing/repairing your credit. Negatives stay active on your account for 7 years. However, every single month and year that passes since that went on your report, it has less and less impact. Meaning, it isn't as bad. The first year after a negative will be the worst, but by the fifth year it might mean very little. Also, your score can continue to go up, even with that negative on there. I've also heard that you can dispute these, even if you are responsible, and sometimes they'll be removed but I have no personal experience with this and cannot personally recommend it.
- Length of History: This tells you how long your accounts have been around. For example, for how many years you've had that credit card, or how long you've been paying your school loans. Every month and year that you pay anything on time without a missed payment (which can become a negative on your report) improves your score. The longer the history of open accounts, the better. It shows that you can spend years paying your bills on time.
- Hard Inquiries: This is pretty important. Every time you apply for a credit card, a loan, or even to a new wireless phone company they can choose to do a "hard inquiry" which means they check your report to decide if they want to lend you anything or rely on you to pay your bill every month. All Credit Cards, and Loans will do this. Each hard inquiry lasts on your report for two years. The more you get the higher your risk goes. Think of it as this, if you have too many inquiries, banks will know that you're applying lots of places for money, which means that you are a bigger risk to take financially than someone who only is applying one or two places in a short period of time. 0-2 inquiries is considered low risk, 3-5 is medium, and 6-8+ is high.
- Account Types: This is a nice little break down of the types of credit that you have, and how big of an impact (good impact) they have on your score. For example, Real Estate can bring your score up the most, and your school loans (Installment loans) are the second biggest hitters. So, in a way, owing so much money for your education is actually helping you a ton financially. Even though, it doesn't feel that way.
3 - Okay! I know that was long, but next tab set!! At the very top. Now we'll navigate away from your home page. I mostly pay attention to only the Home, Alerts and Report tabs, but that's my opinion.
- Home: You're already there, we just talked about it. :P It's the short overview hub.
- Alerts: This tells you every change in your report. So when your score goes up, it creates an alert here. If the score goes down, it shows you here. If there's a hard Inquiry, or a negative posted, they're here. And you can browse through them. It's neat to see and keep track of the changes here, but that's about it.
- Score: It's really not that amazing. Just tells you your score, again. Plus side is the "Understand your score" tab, it will help teach you a little bit about how/why that number is yours. But, again, don't freak out if it isn't very en-heartening.
- Report: THIS IS THE BIG ONE!! This is the gateway to where your actual report is kept. We'll go over this next.
- ID Protection: I honestly ignore this tab completely. I don't know much of it, and a lot of it seems like it's trying to get you to buy more. haha.
- Rewards: Again, same thing with ID Protection.. I just don't think it's useful to me, and seems like marketing from the site.
- Resources: This is pretty decent, honestly. It's like a library of how tos. Of course, the actual government has how-to sites and that kind of info if you want to learn more.
4 - Let's get to your actual report. Click on the Report tab. It will take you to the general Report page, this is not your actual report.
Report Step 1: Ignore most of this page. Click "Refresh Experian Report" You can do this as often in a month as you would like. Sometimes it will change a number of times in the month. Remember it only checks in on things like your credit card info once a month on the statement date, but it does update other information as it becomes available. Refreshing your report here will also refresh your numbers and other things across your other tabs on freecreditreport.com, like "home".
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| Ignore most of this page. Click "Refresh Experian Report" |
Report Step 2: Next, it will take you to what looks like a check out page. Choose the second option, not the three selection (unless it's been your three months and it's saying you can get all three for free. this only happens every 3 months.) Your total for checkout should be $0. Then Click "Submit Secure Order"
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| Your total for checkout should be $0. Then Click "Submit Secure Order" |
Report Step 3: And then it will take you to another screen, click "View Your Credit Report"
Report Step 4: This is the big one, this is your ACTUAL report. This is what banks, credit card companies, ect, all look at when they consider loaning you any money. Free Credit Report does a great job of explaining a lot of things on their site. And the best way for you to learn what it all means is to just read through every section of your report.
It will be all personal information, so I'm not going to include a screen capture for these ones. Just a small capture of the options/parts of your report that will appear on the top left corner as links. You'll want to click through every single one of these.
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| Table of Contents on your actual Credit Report on FreeCreditReport.com |
Table of Contents: Click through each of these in order to read about different parts of your report.
- Personal Information: Make sure everything shown here is accurate and updated. It is important.
- Report Summary: Exactly what it sounds like. It's a summary. Everything has details in the following sections.
- Bankruptcy & Court Judgments: "This section contains court-related information, including bankruptcies, state and county court records, tax liens, monetary judgments, and in some states, overdue child support payments. Remember, bankruptcies remain on your Credit Report for 7-10 years."
- Credit Inquiries: This is a detailed version of what we talked about earlier, the tab that shows up on your home page. :) You can see who inquired about your credit, and if you didn't authorize or initiate it, then you might be a victim of identity theft/fraud and there are processes you can go through to have that removed.
- Credit Cards, Loans, & Other Debt: This is a big break down of every single credit card, school loan, mortgage, car loan, store credit card, and even wireless phone accounts. You can click the "details" link on every one of them to expand it. This will give you/banks detailed information on if you have made consistent payments on time, the current balance, the age of the account, the limit, ect. This is really important to check to make sure everything there really is yours. (Sometimes, you need to do a little more digging, for example I had one on there that I did not recognize, it turned out to be an additional account for the same credit card I had. Another company had bought my credit card company out, so it created a second listing on my report.) Again, if something isn't yours, dispute it - especially if it is negative.
- Credit Score: This is your actual # Score. Banks, and other businesses that inquire about your credit, use this to determine whether to loan you money or what to set your interest rate at. The higher the number, the better the score. Experian uses a scale of 330 (lowest) to 830 (highest), with them anything higher than 700 is considered good credit. the 600s is fair, and so forth. This section will also tell you a little bit about what Raises your # and what Lowers it. Things for you to work on now and in the future.
- Next Steps: This is just a tool from FreeCreditReport.com, and not really part of your report.
Please check out my other entry which explains credit in general in more detail.
http://walkerandwhite.blogspot.com/2012/09/diy-credit-in-general.html
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