There are so many things that rely on your credit score, and whenever you apply for any type of loan or line of credit, your credit report will usually be pulled. Some lenders will look beyond your credit score and scrutinize your actual credit report, while taking note of things like your payment habits, number of open accounts, and so on. Although many consumers understand how credit reports work and how different items can have a heavy influence on their credit score, there are also some facts that many consumers are surprised to learn, including the following:
You’re entitled to a completely free annual credit report
As mandated by the Fair and Accurate Credit Transactions Act, all consumers are entitled to receive one copy of their credit report each year at no charge. However, be wary of websites that claim to offer free credit reports. Many consumers mistakenly sign up for FreeCreditReport.com, thinking that this is the official website that will offer a free report. But this website, along with several others, requires that users input their credit card information. Without canceling within a certain timeframe, users are then billed on a monthly basis. Unless you want unlimited access to your credit report, signing up for these types of monthly services is unnecessary, especially if you are looking to cut back on expenses. AnnualCreditReport.com is the only website that has been officially designated as the place for consumers to receive their free credit report once a year—no strings attached.
Your credit report doesn’t reveal your credit score
Although consumers can access their credit report for free each year, receiving information about their FICO scores will often cost a small fee—usually through a monthly credit monitoring service. However, you may be able to receive one (or all three) of your scores for free. You may be able to access your scores by signing up for a credit monitoring service, and simply opting out before the free trial period is up. Additionally, some credit card programs include this information for customers with each monthly statement and at no extra cost, so if you’re in the market for a new credit card, this is certainly a nice perk to look out for.
Your credit report can contain mistakes
In fact, it’s not at all uncommon and many consumer credit reports do have errors. Without routinely monitoring your credit report, you may be unaware of a potential mistake that could be bringing your credit score down. Not only should you thoroughly examine your credit report once a year and confirm that everything listed is correct, but it’s also a good idea to pull your credit report right before you’re about to apply for something big, such as a mortgage. By doing so beforehand, you can take action to dispute any mistakes, if you find any. Otherwise, if you have a negative item on your credit report that isn’t even supposed to be there, it can stand in your way of getting a favorable interest rate on your loan or even getting approved. It’s best to take care of this beforehand, so that you don’t have to reapply.
You have multiple credit reports
Not only do you have three separate FICO scores, but because Transunion, Equifax, and Experian will separately report your credit activity and process information differently, you also have three separate credit reports. Although the differences can be minor, in some cases, they can be significant. This is also why one of your credit scores can be so drastically different from another.
Credit report checks may or may not affect your credit
Whenever you apply for a line of credit, your credit report is pulled and looked at as part of the decision-making process. This is known as a hard inquiry, and all hard inquiries will have a negative impact on your credit score, which is why it’s crucial to keep credit inquiries at an absolute minimum. Soft inquiries, however, are credit report checks that won’t hurt your credit score. Applying for rental housing or employment, for instance, are examples of soft inquiries and won’t affect your credit score one way or another. You also won’t harm your credit score by pulling your own credit report. As such, don’t forget to take advantage of the free credit report that you’re entitled to every year. Regularly staying on top of your credit can keep you from defaulting on accounts you may have forgotten about, allow you to find mistakes before they escalate into something serious, and so much more.
Nothing above is meant to provide financial, tax, or legal advice. You should meet with appropriate professionals for such services.