Having a good credit score can mean a world of difference in the trajectory of your life. Not only can it affect what type of home you can buy (or if you can even buy a home), but it can also affect the kind of job you can get as well as many other factors in your life. Many people do not know their credit scores because they are either afraid to check it for fear it will be lowered or because they believe they have to pay.
However, you can find out how to get a free credit report to check on your score before you attempt to make those big item purchases or apply for credit cards or other perks. In order to understand why it is important to know your credit report, you should first consider what a credit report is and where you can find them. You should also consider who else knows your credit score and how they use this score both with and against your favor.
What Is a Credit Report?
Simply put, your credit report contains a record of all your credit activities. This can include major purchases you have made through traceable electronic transactions. It also includes information on payments you make such as car payments, credit cards, mortgages and student loans among many other kinds of lifestyle expenses. Instead of calling each of your creditors for information, companies now get credit reports to determine whether or not you are a good risk for a loan or big ticket purchase.
This does not mean that you have a high credit score if you are someone who frequently makes payments on time for all your debts but consistency is very important in keeping a higher credit score. Your score depends very much on the kinds of payments you make and whether you appear to be a good risk for something outside your usual purchases. However, missing payments or having to take an action such as filing bankruptcy or Chapter 11 can have very serious repercussions regarding your credit score.
Who Keeps Track of Your Credit Score?
There are three major credit reporting companies in the country: Equifax, Experian and TransUnion. When you are applying for a loan or credit card, a credit check will go through each of these companies to see where you fall in the credit score range. Your score will fall between 300 and 850 according to Fico, the Fair Issac & Company that credited the mathematical calculation that determines the credit score.
Knowing what range you fall in will help you determine what you need to do about your credit score. These are the current credit score ranges:
• 300 – 499: This is a bad credit score range and you are unlikely to get loans or credit cards.
• 500 – 579: This is also a poor credit score, but you can take steps to improve.
• 580 – 619: This is a low credit score and you may need cosigners or others for loans and other purchases.
• 620 – 679: This is an average or okay score, but you should still try to build upon it for major loans and purchases.
• 680 – 699: This is a good credit score and means you may have just one mark against you that is unlikely to affect whether you can get loans or credit cards.
• 700 – 850: This is a very good or excellent range, so all your applications will be approved.
Once you find out where you fall in this range, you can take steps to either maintain or improve your score.
How to Get a Free Credit Report
Now that you know what the credit score is and what it means, you need to know how to get a free credit report. There is only one way to get a free credit report with no other charges or purchases for services or products. You need to go to AnnualCreditReport.com because this is the only source that is authorized by the federal government to give you free access to the credit report that is yours.
However, there is one drawback to this site. You may only access the credit report once every 12 months. Still, you can get the report from all three credit reporting companies. This is due to the Fair Credit Reporting Act, which guarantees you access to these companies. Since you are limited to this check once a year, you need to choose a good time to take advantage of it. Usually you may want to do this before you apply for a credit card or make a major purchase such as insurance.
There is another way you can stretch your credit checking throughout the year. Instead of asking for all three reports at once, you can ask for a report from each company separately. You cannot be charged at any point for these reports because each one is required by law to supply you with a report once a year. If you like to monitor your score throughout the year, you should consider this option so that you can look for instances of identity theft or other potential problems with your score.
Will Checking Your Score Hurt Your Credit Report?
When you are applying for a pre-approved credit card or other offers, you do not hurt your score. These are soft inquiries and they do not show up on your report. Even when you request a free report or purchase the report from one of the credit reporting companies, you do not hurt your score because they are not visible to lenders and others. However, you do need to watch out for hard inquiries.
Hard inquiries occur when you go through a major application such as a mortgage because the lender will run a check that shows on your report. In other words, applications you initiate are more likely to show up on a credit report. Usually your score is only lowered by five points or less, but you do not want it to add up.