Want to skip the basics and jump right to the credit check up How-to-Guide?
Credit is quite a vague term and can mean several different things. So first let’s start with some basics:
What is a Credit Report?
- Contains a summary of your credit history
- What credit cards and/or loans do you have?
- How much money did you owe each month?
- Did you make the payments on time?
Your Credit Report is essentially a paper trail of all the times you borrowed money. When a lender looks at your Credit Report they can get a pretty good idea of how trustworthy you are. Which is obviously important when they’re considering letting you borrow their money…
Who creates my Credit Report?
There are 3 major credit reporting agencies (aka credit bureaus) in the US:
These companies are responsible for compiling your Credit Report. They gather your information and payment history from the credit card companies and anyone else you borrowed money from.
What is a Credit Score?
Think of Credit Score as your GPA. Each month you take an exam: If you pay your monthly credit card/loan balance on time you receive an A+. Your Credit Score is a direct reflection of your Credit Report. While there are other things that influence Credit Score, the most important driver is paying your bills on time.
Why should I care about my Credit Report/Score?
Plain and simple, everything will become more expensive and difficult if you have bad credit. It will be harder to borrow money and you will pay a higher interest rate on any money you are able to borrow. Essentially you are untrustworthy when it comes to money. Therefore, you must pay extra to incentivize someone to loan you anything.
Okay now that we got the basics out of the way, lets get into the juicy stuff: Why do you need to check your Credit Report/Score?
1. Monitor for Fraud
Let’s face the facts: unless you live under a rock, your personal information is all over the internet.
That means no matter how poor we think we are, we are all potential targets for identity theft. Do not just assume that the banks have adequate measures in place to protect you from credit card fraud. You have some responsibilities when it comes to protecting your identity. You should be checking up on things every once in a while and raising a red flag when things don’t look right.
A Credit Report will list all your credit cards and loans, so you can easily see if there is a credit card account that was opened fraudulently under your name.
2. Close Old Accounts
Flashback to the summer before you left for college:
You are at the mall with your besties buying new clothes so you can dominate your freshman year. You get to the checkout and the cashier informs you that you can save 20% by opening up an Abercrombie & Fitch credit card. You as a strong independent 18-year-old decide to take the bait and open the card. In reality you had no clue what a credit card was, but you bought the clothes on credit anyway and never thought about it ever again.
Flash forward to present day. That $50 balance that you left unpaid has not been forgotten. In fact, you owe 20% interest on the open balance every year. So now you owe $200 and your credit is getting dragged for it.
As mentioned above, your Credit Report will show all of your credit cards, so you will be able to identify if you have outstanding balances in any of your old/forgotten credit card accounts. Additionally, you can spot old accounts that you no longer use (ex: Abercrombie & Fitch credit card) and close them out.
3. Your Credit is Your Reputation
As mentioned above, having bad credit will make everything in life more difficult and more expensive. Your credit is your honor. Credit Reports are not only seen by mortgage lenders either. Businesses, employers, cell phone companies and insurance companies will all use your credit to learn more about you. Credit Report errors happen all the time and can unfairly tarnish your reputation.
Therefore, it is important that you check your Credit Report at least once a year to make sure your rep is not being ruined by fake news.
Now for the fun part, how do I actually access my Credit Score and Credit Report?
Below I will outline two ways to view your credit. Both are important and should be done at some point during the year. However, if you area bit strapped for time right now, just start with CreditKarma.com. You’ll be able to quickly see all your accounts and close any store credit cards leftover from your teen years.
(1) Continuous Credit Monitoring (CreditKarma.com)
- Time Estimate: 5 minutes
- CreditKarma pulls your Credit Report from 2 of the 3 credit reporting agencies (Equifax, Transunion)
- Credit Report will be not be official and may not contain latest information
- CreditKarma will calculate a Credit Score for you based on the Credit Report of each agency. This score may not be perfectly accurate, but it provides a good estimate.
- You can look at your credit as many times as you like without having to pay
- Go to CreditKarma.com
- Click the “Sign Up” link in the top right hand corner
- Enter in an email address and password
- Give some personal details:Name, Address, Social Security Number
- Answer some questions to verify your identity
- You will then see your Credit Score from Transunion and Equifax
- Simply click on the Credit Score from a given agency to bring up your Credit Report
(2) Annual Credit Check-up (AnnualCreditReport.com)
- Time Estimate: 10 minutes
- Pulls Credit Report directly from the 3 credit reporting agencies (Equifax, Transunion, Experian)
- Credit Report will be official and reflect the most up to date information
- Every 12 months you can get one free copy of your Credit Report from each agency
- To get your Credit Score from each agency you will have to pay
- Go to AnnualCreditReport.com
- Click the “Request Yours Now!” link in the main ribbon
- Give some personal details: Name, Address,Social Security Number
- Determine which agency you want a report from. Remember you can only pull a report once a year from each agency. If this is your first time ever pulling your credit report, then I would recommend getting the report from all 3 agencies.
- Each agency will then require you to verify your identity by asking a series of questions that you should know the answer too. I emphasize the word should, because certain verification questions can ask about events dating back several years.
- You will then receive a report from each agency. MAKE SURE TO SAVE THE REPORT AND/OR PRINT IT. You can only access this information once a year, so it is important to preserve it!