Everyone now encourages you to get your free online credit report and to read it carefully. We agree.
You can get it free each year from AnnualCreditReport.com – but those reports don’t include your credit scores, and the scores are important for you to monitor. In order to get your credit scores, you need to get your free credit report from this or a similar site, or you can purchase your credit scores from each of the bureaus separately.
Much of the information on your report is self-explanatory. The first few sections give an overview of your credit history and your personal information. They list your employment information, your address, etc.
You need to check that section to ensure that no one has stolen your identity and transferred one of your unused accounts to a new address – and that they haven’t used your work history and experience to land a job that they couldn’t get using their own information.
But what does the rest of it mean? The payment history section of your credit report will include codes that mean nothing to you.
First understand that Equifax, Experian, and TransUnion use different codes – and that the free online credit reports you can get are following different scoring models. Experian uses the FICO scoring model, while TransUnion uses Empirica, and Equifax uses Beacon.
This is one of the reasons that the credit scores will not be exactly alike. The other reason is that some of your creditors may report to one credit bureau and not another. Thus, the information they’re using to compile your score will not be identical.
Your payment history code will include a number from 0 to 9. 0 indicates up-to-date payments while 9 indicates a collection or bankruptcy. Numbers 1 through 8 indicate varying degrees of financial difficulties. Each of the credit bureaus offers a free online tutorial to let you know what each of those numbers indicates.
Next, look at the letters. On your Equfax and Experian report, C will indicate an account in good standing while G means collection and K means repossession. H indicates a foreclosure and J reveals a voluntary surrender. TransUnion uses more numbers rather than letters.
Your credit score will range between 300 and 850. Most consumers who are not in serious financial trouble will have scores between 650 and 750. These are considered good and they can usually be made even better with a little financial planning. Very few consumers attain a score of 850, but you should strive for the highest score you can get. The higher the score, the lower the interest you’ll pay on homes, cars, and credit cards.
Scores below 450 will generally mean that you need to do some work to rebuild credit before you can get a loan. Secured credit cards can help you accomplish this, as can becoming diligent about making every other payment – such as utilities – on time and in full.
CreditScoreQuick.com
