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Your Credit Report

When’s the last time you took a good look at your credit report? If you never have, then let’s do it, for Pete’s sake!

Everyone is entitled, by law, to one free copy of their credit report each year. We highly encourage everyone to do this! (Rest assured, this will NOT negatively impact your credit score.)

  1. Go to annualcreditreport.com. Other sites that charge for this service are not legit. (This one’s too legit to quit!)
  2. Fill out the requested information.
  3. We recommend getting reports from all three credit bureau agencies; they’re all free and they may not all contain the same information. It will send you to each of their sites to verify that you are who you say you are.
  4. The free report will not contain your credit score. If you would like to include it on your report, there is a place to purchase your credit score with each of the bureaus. You don’t need your score to review your report.
  5. Go through each and every item on all three reports. Look for anything that is inaccurate. This could be the result of a mistake on someone’s part or of fraud. Fraud can happen if someone steals your identity and poses as you to get credit.
  6. Please do this once each year. It’s free and a it’s great way to see what lenders and other see when they review your report.

If you see inaccurate information or what appears to be fraud on any of your reports, you’ll need to contact that credit bureau and they will work with you on getting it corrected.

Do you know your credit score facts? (everything from this point on was totally copied off of Experian’s website)

Your credit score is calculated by formulas that determine your creditworthiness. By using your credit score, a lender can evaluate the risk of extending credit to you. Whether it is buying a home or car, or even starting a small business, a credit score provides the lender a quick way to view your credit risk. This risk represents the likelihood of you paying your loans back and on time. A credit score can change frequently and goes up or down as information in your credit report changes. Your credit report could change daily as your creditors provide new information constantly. Checking your credit score is a good way to keep track of changes to your credit as this is indicative of positive or negative events (that have occurred) in your credit history.

30% of your credit score is based on your credit usage

Credit usage refers to how much money you’ve spent on accounts that have credit limits, such as credit cards. Also called a utilization rate, it measures your total balances compared to the total of your credit limits. High credit usage or utilization rate is a strong indicator of credit risk and can lessen your ability to gain new loans.

31% of your credit score is based on your payment history

The most significant factor in determining your credit score is your payment history and making your payments on time. Late payments remain on your credit report for 7 years from the original delinquency date. The original delinquency date is the payment date that was first reported late by your creditor.

15% of your credit score is based on the age of your accounts

Having a lengthy credit history shows lenders you have an established record of managing your debt. Closing older accounts, such as credit cards could negatively impact your credit score. Experian retains closed accounts with no negative information associated with them for 10 years from the date they are reported closed. As a result, positive credit information remains on your credit report longer than most negative information, such as late payments.

14% of your credit score is based on the types of accounts you have

There are four basic types of credit: Real Estate Loans, Installment Loans, Credit Cards, and Retail Cards. Having a good mixture of credit types along with high quality accounts, such as a mortgage loan, shows lenders you can manage your credit responsibly.

10% of your credit score is based on inquiries or “credit checks”

Every time you apply for credit, a “hard inquiry” is placed on your credit report. Having too many hard inquiries could indicate to lenders that you’re trying to overspend. Hard inquiries stay on your report for 2 years.

Experian credit scores mostly fall between 600 and 750. A credit score above 700 signals good credit management and typically results in better rates than for those with scores under 700. Experian’s score range is between 330 and 830. There is a great variety of credit score models with several score ranges because different lenders may require custom scoring models when assessing your credit. Lenders use varying score models with different score ranges to help guide their decision on determining your rate and to grant you credit. For example, an auto lender and a mortgage lender have different needs and criteria, and therefore custom scoring models would be used to calculate your credit score. Even though these types of credit scores could be different in number and range, it is likely that your two different scores represent the same level of lending risk. When you get your credit score from Experian, you also get an explanation of what your credit score number represents in terms of how lenders view your risk or worthiness, along with the factors that affect your credit score. If your Experian credit score is good, you will likely have a good credit score with your lender, even if the numbers are different. When you review your score, you should not focus too heavily on the number, but where you fall in the range of risk and what factors in your history most influenced your score. These score factors will be consistent no matter which scoring model is used.

Credit scores are not included in your credit report. A credit score is calculated by the credit reporting agency from the information that is in your credit report and is not part of your report. The information in your credit report is collected from various companies that provide data about your credit. These companies have to follow specific credit reporting rules, as listed under the federal Fair Credit Reporting Act. A credit score is not part of your report because it is an additional service provided that is calculated at the time of request.

Improving your credit score takes time. If your credit score is based on accurate information, then there is no quick way to improve your score. Consumers can sometimes find inaccurate information in their credit report that was reported by lenders. And sometimes this inaccurate information could potentially affect your credit score negatively. In such cases, it is easy to file a dispute with Experian, where our specially trained agents can work with you to correct the information from your lender. In order to initiate the dispute, you will need a copy of your credit report.

Closing old or unused accounts can hurt your credit score. The most important factor is not missing any payments. Other important score factors are having a low balance-to-limit ratio and the age of your accounts. If you close an unused account, you eliminate those open credit lines and in turn, decrease the amount of credit available. When compared to the amount you owe, this could increase your ratio and perception that you are close to your max on your remaining accounts. Also, the age of your accounts show your credit worthiness over extended periods of time and closing an old account could also affect you negatively.