By: Glenda Wentworth, Eagle County Family & Consumer Sciences, Eagle County
Have you seen any of the television commercials on checking your credit score? It seems that accessing your credit score is just as confusing and frustrating as it is to check your credit reports. Credit scores were once a mystical number you had to pay for or weren’t easily obtained. You may have noticed that over the last few years, many credit card issuers and other financial companies have begun to offer free credit scores to their customers.
Be aware a credit score and credit report are two different financial documents. Your credit score is meant to illustrate your credit worthiness. Generally, your credit score reflects the information in your credit reports. The three biggest credit reporting companies are Equifax, Experian and TransUnion. Federal law gives you the right to get a free copy of your credit reports from each of the three national credit reporting companies once every 12 months. Coloradans may get a second free copy from each company each year.
To order your free annual credit report from one or all of the credit reporting bureaus and to purchase your credit score, visit www.annualcreditreport.com, call toll-free 877-322-8228. Or you may complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P. O. Box 105281, Atlanta, GA 30348-5281. Generally, credit reports do not include a credit score; the Fair Credit Reporting Act (FCRA) gives you the right to get your credit score from the credit reporting companies. However, they are allowed to charge a reasonable fee for the score.
When you obtain your credit report, look for
- Mistakes in your name, phone number, or address.
- Loans, credit cards, or other accounts that are not yours.
- Reports saying you paid late when you paid on time.
- Accounts you closed that are listed as open.
- The same item showing up more than once such as an unpaid debt.
Check your credit report for accuracy. If you find errors in your credit report, you will need to contact the credit reporting bureau and explain what you think is wrong and why. Request the information be corrected or deleted. It is always good to include any copies of documentation that you have to support the dispute.
Your credit scores have a major impact on your financial opportunities. Credit scores are used by lenders to determine your credit risk. They are used by lenders to help predict the likelihood that you will pay back your credit obligations as agreed. Your credit score is considered in a loan approval, the terms you are offered, or the rate of interest you will pay for the loan. A higher credit score may mean a lower interest rate, resulting in dollars saved over the course of the loan.
Some types of credit scores are compiled by specialty consumer reporting companies. This information is used by entities like insurance carriers to help issue policies and set premium rates for your auto and homeowners insurance. Some employers, landlords and phone companies are using credit scores to assess how you manage financial responsibilities or to provide you with a service and on what terms. A higher credit score generally means you are less of a risk. Therefore, you are more likely to get credit or insurance, and/or pay less for that service.
A credit score is a “snapshot” of an individual’s credit history at a particular point in time. The good news is you are increasingly able to see your credit score from a variety of websites. Some websites offer credit scores for free in exchange for signing up and paying for a monthly credit monitoring service or to market their services to you. A number of credit card companies offer your credit score for free if you have an account with them. Just remember, these credit scores are estimates, not the actual score lenders will use. However, they do give you a sense of where you are financially at that point in time.
Credit scores play a crucial role in your financial life. There are many tools and resources to help you understand and improve your credit profile. For more information on credit scores and reports:
Fair Isaac Corporation
Credit Scores, Colorado State University Extension
Credit Reports and Credit Scores, Federal Reserve Board
Consumer Financial Protection Bureau