Free Credit Report Advice and Facts About Your Credit Score
Written by: Kristy Welsh
Last Updated: March 17, 2017
If you are thinking about buying a car or a house, the first thing that pops up into your mind is — "What is my credit score?" This is the first thing we think of because we have been conditioned to equate credit score with getting credit. We are not saying that statement is not essentially true, but, sometimes you have to step back and take a look at the overall picture. Is your credit score that important? What other things should you be focusing on when reviewing your credit reports? Well, this article takes a look at what is important and we will give you some advice on what to work on when thinking about applying for new credit.
Don't Be Overly Concerned With Your Credit Score
According to a recent survey, there are over a hundred different scoring models out there, which means there are just as many different credit scores. FCIO is different from VantageScore, which is different from other proprietary scoring models, such as insurance scores. The information and algorithms each of these models uses is different as is the final score you are going to get from each and every one of them. That, on top of the fact your information can vary from day to day, makes it extremely difficult to know your credit score for certainty.
So, instead of focusing on your score, focus on your report — that is — all three reports from Equifax, Experian, and TransUnion to be exact. Unless your lender tells you which one they are going to use, it is best to make sure you get yearly copies of all three.
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How to Order Your Credit Reports
There are two ways to get your credit reports, either for free or for a small fee. Depending on whether or not you want to pay for these reports and how often you want to obtain a new one, there are two ways to go about getting your reports.
- You are legally entitled to get each of your credit reports, for free, every 12 months from AnnualCreditReport.com. So, by staggering when you get the free copies, you can check the report for a different bureau every four months. But, you will have to pay extra to get your credit score.
- You can sign up for a free credit score or credit monitoring service from a number of companies and you will get one or all of your credit reports as part of the deal. Make sure to read all the fine print before signing up for one of these programs as they will get you for a monthly fee after the initial free trial period. You can check out our credit report offer guide for more information on some of these programs and see which one is best for you.
Why Get All Three Credit Reports?
Since we are talking about not focusing on your credit scores, we need then to focus on your credit reports. There are three reports you need to make sure to order — Equifax, Experian, and TransUnion. These are the big three credit bureaus and these are the ones used by 99 percent of all lenders. The reason you need all three is that each one has their own way of gathering and processing credit history data on you. You might have a creditor report to one bureau but not another, and, you may have errors on one report and not another. So, you need to check each report very carefully for errors and omissions.
If you do find any errors on a credit report, make sure to dispute those errors with that particular credit bureau. A recent study showed that 70 percent of all credit reports contains some kind of inaccuracy with 25 percent of those errors being bad enough to deny someone credit. So, it is up to you to make sure your report is error free.
Examine Your Credit Report For Errors
The number one thing to look for is errors, but after you have done that, look to see where you can make improvements. Here are some things to look for:
- on-time payments
- different kinds of credit
- keeping credit balances low
- minimal credit inquiries
If you see you might be lacking in one or more of those areas, time to make a plan and make some improvements. Are your balances high? Make an effort to pay them down to below 30 percent of your available credit. If all you have are credit cards, time to think about an installment loan or line of credit and a great place to get one of these is at a local credit union. Lastly, if you see late payments, make a whole-hearted effort to make your payments on time. Late payments are the number one downfall of a credit score.
Still Hung Up on Knowing Your Score? Choose One
OK, so you are a numbers kind of person and you really, really want to know your score. Then pick one to focus on and we suggest you choose your FICO Score. Why FICO and not VantageScore? Well, your FICO Score is the one the majority of lenders look at when evaluating you as a credit risk. The big three credit bureaus will show you your VantageScore so you will have to go to the actual FICO website to order your score.
You can get your FICO Score one of two ways:
- You are entitled to a free FICO Score when lenders who use that score deny you for a loan or don't give you the best terms.
- You can pay for your score by going to myFICO.com.
A FICO Score ranges from 300 to 850, which is the same for VantageScore. What’s different is how FICO and VantageScore algorithms weight different categories of credit information to generate scores. We have a great article explaining the differences between FICO and VantageScore on our site so check it out if you want more information.
We all know how secretive the credit bureaus are when it comes to calculating your credit score. While no one knows exactly how they come up with your credit score, we can at least try to lessen some of the bad items found in our credit history. So the bottom line is, don't get too hung up on knowing your credit score but focus on your credit reports and getting rid of negative information. The better your credit report, the better your score will be down the road. And this means lower interest rates on loans and saving you money.