The Fair Credit Reporting Act entitles everyone to one free credit report every year from each of the three nationwide credit bureaus, but many consumers don’t take advantage of it.
People tend to request copies of their credit report if they are planning a major upcoming life event, like buying a house, or if they are a victim of identity theft. However, most of the time, a credit report tends to be out of sight, out of mind.
Experts say that is a mistake. Here’s why: your credit report details how you handle credit. That information is then used to determine your credit score. Your credit score – a three-digit number – is designed to help lenders figure out how big of a risk it would be to lend you money.
If you want to borrow money and get a fair interest rate that reflects your true risk profile, it’s worth taking the time, at least once a year, to review your credit report.
Here are few things you need to know about credit reports:
Annualcreditreport.com is the only authorized website for the free annual credit report that you are guaranteed by law. You can use the site to request your Experian, Equifax and TransUnion credit reports online. (Those are the three major credit bureaus that lenders use to search your credit score.) Different lenders report to different credit bureaus, so it’s important to pull your reports from all three. The process to request the reports is as simple as filling out a form online, picking the reports you want and verifying your identity. Be prepared to provide your name, address, social security number, date of birth and other information.
Credit reports include four sections:
- Identifying information
This is where you will find your name, social security number, current and former addresses, phone number and other personal information.
- Credit history
This is your complete borrowing history, including every loan you’ve ever had and whether you paid on time. You’ll also find information such as creditor names, account activity, account number, credit limit, minimum monthly payment and current balance.
- Public Records
This is where negative credit information like bankruptcies, liens and court judgments are listed. Negative information can remain on your report for up to seven years, so keep this section as clean as possible.
This is triggered when your credit report is pulled. Inquiries fall into two categories: Hard and soft. Hard inquiries are when potential lenders pull your report when you apply for a loan. They can temporarily lower your credit score by up to five points. Soft inquiries are when a person or company checks your report as part of a background check. Soft inquiries don’t affect your credit at all, so don’t worry about frequently checking your own credit reports.