Modern life seems to revolve around credit. Having a good credit rating makes it easier to buy a car, get a mortgage, and sometimes set up the utilities for that home. It is hard work to establish your credit and maintain it – and this hard work creates a credit record.
The record of how you’ve used your credit and whether you’ve been successful in paying your fees is important because you can’t make the big purchases you might want or need without a clean credit history. The history of your credit usage is recorded by one or all three credit reporting agencies, and this record is called your credit report. You should check this report as often as possible to make sure nothing is hurting your credit score.
A credit report greatly affects whether you can get loans, mortgages, credit cards and more. That̵7;s why it’s important to not only know how your credit works, but also how to read and access it. It’s also good to know how often you should check it and what to look out for.
What is a credit report?
There are three main credit reporting agencies in the United States: Equifax, Experian, and TransUnion. Each credit reporting agency maintains a record of your credit usage, depending on who the merchants and companies report credit obligations to. These credit reporting companies compile your credit usage and obligations in a report.
This report may contain a lot of information about you. The four main categories of information in your credit report are:
- Personally Identifiable Information
- Credit accounts
- Credit Inquiries
- Public records and collections
Your personal data includes your name, address, social security number, date of birth and employment.
Credit accounts are any accounts you have with lenders, such as a credit card or a car loan. The report shows when you opened the account, how much you owe and your credit limit. Most importantly, it shows your payment history and whether you’re keeping your accounts current by making payments on time. A record might look like this, where “x” means current payments and “-” means no data:
- Account information
- Account name
- Account number
- Account type Credit card
- Liability Shared with XYZ
- Opened 2009-04-20
- 2/21/21, 12:36 PM Annual Credit Report – Experian
- Status Open/Never late.
- Balance $1,234
- Balance updated 2022-12-02
- Last payment $0
- Monthly payment $50
- Credit limit $3,000
- Maximum balance $500
- Terms NA
A credit inquiry appears on your credit report when someone checks your credit report. This happens when you try to open a new credit account, for example when you apply for a loan or credit card.
On the report you will be able to see who made the request and whether it was hard or soft. A request made when you apply for a new loan is usually called a hard draw. A soft pull is done when a lender does a credit check for non-lending purposes.
An example of a soft pull would be if you have applied for a job and the employer wants to do a credit check to see how you manage your money. Credit card companies also make soft moves when sending pre-approval notices. For example, when you check your report, you may see a soft pull record similar to this:
- American Express
- Asked on 11/10/2022
- PO Box 981537
- El Paso TX 79998
- (602) 537-8500
Credit bureaus don’t see soft moves as something that will affect your ability to repay debt, so it shouldn’t affect your credit. (When you check your own credit report, it’s also a soft draw.)
It is important to note that when credit reporting agencies compile your credit history, they check public records to see if there is anything that may be related to creditworthiness. There is only one public record that should appear on your credit report – a bankruptcy filing. If you find other publicly available information about the report, you should contact the agency to have it removed.
How do you control it (and why)?
Checking your credit report is much easier than it used to be, thanks to the internet.
All you have to do is go to AnnualCreditReport.com, select the agency you want to request information from and fill out the appropriate form. Each agency can verify your identity using questions about your credit usage and history. Some examples of questions might include confirming a previous address or a vehicle you’ve owned, selecting a current loan’s monthly payment, or verifying other similar information.
You can choose to request reports from all three major credit reporting agencies, but the site recommends only selecting all three if you’re about to make a large purchase, as you typically only get one free copy of your credit report per bureau per year. (However, you can currently access your credit report at each of the three bureaus once a week for free until December 2023.)
The website will take you to the report you have selected and send you a security code via email or SMS, depending on the method you choose. When you enter the code, you can view the report from the agency you selected and download or print it. If you request a report from more than one agency, the process of answering identity questions, entering codes, and printing is repeated until you have all the reports you wanted to see.
By looking at your reports, you can ensure that there are no mistakes or entries that you did not make. You can also see who is doing soft pulls on your credit history and see any charges that may affect your credit. If you see something in your report that looks wrong, you’ll be given the option to dispute it via an on-screen button.
Unfortunately, your free annual credit report usually doesn’t show your credit scores. To see this, you can go to any of the three credit bureau websites and pay a fee to access them. For example, Experian can get your tri-bureau credit score and FICO score.
How often should you check it?
You’ve probably heard that you should just check your credit report to make sure all entries are up-to-date and accurate. It is recommended by most financial experts to check your credit report at least once a year. But you may want to check your report more often, especially if you’re trying to build or increase your credit.
More importantly, it’s important to check your credit if you want to make sure your information isn’t being used by someone else. Data breaches and information hacks are a regular occurrence as companies and government agencies store your personal information. If hackers and thieves obtain your personal information, they can use it to create new accounts, which can damage your credit.
It is best to determine a frequency that works best for you. If you’re trying to maintain a healthy credit score or want to keep an eye out for potential identity theft or fraud, you may want to check your report often. However, it doesn’t hurt to just check your credit score a few times a year if you’re confident in your current credit score.
You may also want to keep an eye on your credit score to make sure it doesn’t drop. Your credit score can drop for a number of reasons, including missing a payment on a loan or credit card, applying for a new loan, or having high utilization.
Your score can also drop if you don’t use your credit. That’s why some experts recommend using a credit card to pay for everyday expenses like gas or food and then paying it off before the payment is due. This shows activity and responsible credit use on your credit report, which can start to boost your score.
Many banks have online applications that estimate your credit score. It’s important to note that these scores are not your true credit score – they’re generally just calculated using the information from one of the credit reports. The score may not be an accurate reflection of your true credit score because the one bureau the bank used may not have the same information as the other two bureaus.
You may also see points calculated differently because there are two scoring systems. One is called VantageScore and the other is called FICO. The two systems use different scoring criteria, making the scores different. Many lenders use the FICO score to make their loan decisions.
One system isn’t necessarily better than the other, but FICO assigns percentages to five categories to create your score. VantageScore assigns weights to six categories, labeling each category as extremely influential, very influential, moderate, and so on. So if you check your score at one of the three agencies before applying for a loan, you will get a score calculated using VantageScore. When you apply with your lender, they will most likely use FICO, which gives you a different score.
Haven Life and your credit
If you’re thinking about your credit score, chances are you’re considering some large and/or long-term financial commitments. If so, you may be wondering what happens to those commitments if something happens to you. Unfortunately, any unpaid debts may fall on your loved ones should you die before they are paid.
One way to reduce that risk is life insurance. You can buy life insurance with enough money to cover these expenses in the event of your death, and choose a term that covers the years you pay them off.
Best of all, you can do it affordably — often less than what you pay for streaming services every month. (Oh, and in case you’re wondering, your credit score doesn’t affect what you’ll pay for life insurance. That said, your credit attribute — for example, if you’ve declared bankruptcy — may be a factor.)
For example, a 30-year-old woman in excellent health can purchase a 25-year policy worth $500,000 for $20.81. It’s a small price to pay for peace of mind, and you can start your journey by getting a free quote online today.