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Michelle Jones, Founder and Editor of BetterBudgeting.com
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 Credit Reports & Credit Scores 

Living a Better Life
(featured column... from the editor's desk)

Credit Scores and Credit Reports
by Michelle Jones

It's a good idea to check your Credit Report for accuracy every year, but especially before seeking a new loan.  Reporting errors are very common and can be quite embarrassing if not corrected beforehand. Just one small error on your report can bring your Credit Score down, and that's the information your loan company will be using to decide your interest rate.  

*  *  *

What is a Credit Score?

Your Credit Score (also known as a Beacon Score, Emperica Score, or Fico Score - from Fair, Isaac and Company), is essentially an estimate of your credit value to lenders.  In other words, it is the information lenders use to determine your credit and interest rates.  The Credit Score is based on your personal credit history and can change easily, for better or worse.  

What Affects My Credit Score?

Here are some things that will affect your Credit Score...

Positive

bulletSteady employment (your bills will likely be paid on time)
bulletActive credit use with a few accounts
bulletTimely payments
bulletUsing less than 80% total amount of credit available
bulletFew requests for new credit*

Negative

bulletPeriods of unemployment (your bills may become late and even in default)
bulletToo many requests for new credit*
bulletMultiple credit card accounts
bulletBankruptcy, Collections, Judgments, Defaults, Liens, Foreclosures
bulletSmall finance loans (possibly implying loan consolidations because you're in trouble)
bulletLate payments, missed payments
bulletUsing more than 80% total amount of credit available
bulletTotal outstanding credit

* When a consumer asks for his/her own Credit Report, it does not hurt the Credit Score.

Why Does My Credit Score Matter?

Obviously, the better your Credit Score the better credit (and interest rates) you will receive when seeking a new loan. But that's not all. It's important to keep your credit in good shape and make sure there are no errors on your report, even if you don't need a new loan right now.  

You see, banks and credit companies are not the only ones looking at your Credit Score.  In addition to all lending institutions, your Credit Score may be taken into consideration by current and future employers, insurance companies and even rental landlords. 

What are the Numbers?

Credit Scores have a wide range, 300 to 850, but the following levels are the most common.  In order to get the best interest rate on a new loan you'll need to be in the top 2 levels, and preferably the top...

850-720
719-700
699-675
674-620
619-560
559-500
Credit Scores of 499 or below are considered "sub lenders."

Visit MyFico to learn more about how credit scoring works!

How Do I Get a Copy of My Credit Report?

It may cost you $10-12 to get a copy of your credit report, but If you have been turned down for credit or have received any negative feedback concerning your credit in the last 60 days, you can obtain a FREE copy of your credit report by contacting the three main credit bureaus listed below. (see additional information below for free annual credit reports) 

Equifax is considered the main credit bureau and most widely used by loan companies, but it's also a good idea to get your report from all three companies because they may include different information - as they do not report to each other.  Also, if you're married, each spouse should order a copy of their own report - if there is a mistake on one spouse's report it is likely to be on both.  

After you contact the credit bureaus and order your credit report, you will receive a copy of your report within 2 weeks.  

How Do I Correct Errors on My Credit Report?

After receiving your credit report, sit down with some good lighting and review it thoroughly.  It can be a bit tedious to check your report thoroughly, especially since they include information going back 7-10 years, but it's well worth your time. 

If you find any errors on your credit report that need to be corrected (or old accounts you would like to be removed - which they may or may not do), simply fill out the information on the correction pages included and mail them back.  You will also have the opportunity to update your employment information.  

In a few weeks you should receive an updated copy of your credit report, along with an explanation of any changes they made.  And rest assured, if there is a true error on your credit report, they will remove it promptly!  

If for any reason they do not correct the error, send them a second more detailed letter explaining in full why it should be removed - that should get it done! 

Here are the main 3 Credit Bureaus to contact...

Equifax (Many people consider this the most popular credit bureau.)
1-800-997-2493 or 1-800-685-1111
P.O. Box 740241
Atlanta, GA 30374
www.equifax.com (Look for their new service, Equifax Score Watch™)

Experian
1-888-397-3742
P.O. Box 9595
Allen, TX 75013

www.experian.com

TransUnion
1-800-888-4213
2 Baldwin Place
P.O. Box 2000
Chester, PA 19022

www.transunion.com

Free Annual Credit Reports
US consumers can get their credit report for FREE once a year!
Call toll free: 1–877–322–8228
Hearing impaired TDD service: 1–877–730–4104

Annual Credit Report Request Service
PO Box 105283
Atlanta, GA 30348-5283
www.annualcreditreport.com

(Please note: The Annual Credit Report company is sponsored by Equifax, Experian and TransUnion.  If you have already ordered a credit report in the last 12 months and would like to order a new one, you can contact the credit bureaus directly.)

Please keep in mind, Credit Bureaus are simply recording agencies who are paid by those seeking your credit report.  Federal laws have been put in place to protect you, the consumer, and they are very much in your favor.  

In other words, they do not have legal powers over you and are usually very easy to work with.  It's just a matter of taking the time to make sure your information is being recorded correctly, and not doing so can be very costly.

And one last thing, please use caution when seeking your Credit Reports online with new companies!  You can contact the Credit Bureaus as listed above and order your reports directly from them each year.  We will keep this page up to date with their contact information and provide the link on the left hand column of our site. 

*  *  *

 

Copyright © 2004, 2005, 2006 by Michelle Jones.  All rights reserved.

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