Credit Scores and Credit Reports: What, why and where?

Unless your last name is Rockefeller it’s likely credit is a necessary evil in your arsenal of personal finance. Even if you’ve dedicated yourself to a cash only existence, credit scores can still effect your life. For instance, did you know credit scores are commonly used by Human Resources departments? If you’re up to your ears in debt, that dream job might just pass you up because of your faulty credit.

Credit Score and Credit Report: What’s the difference?

Your credit report is a list of all current and past debts, including if you have made late payments, missed payments, etc. You can get your credit report from all 3 agencies (TransUnion, Equifax, and Experian) for free at AnnualCreditReport.com. You want to make sure you have credit reports from all 3 agencies, since they differ in their reporting methods.

Why is it important to check your report?

It’s important to check your credit report for errors. You may have a name that is similar to a family member, or someone may have opened an account in your name without you knowing. Once I even found a credit line that was open on my report, even though we had requested that it be closed.

If you have any blemishes in your credit history it’s important to check to make sure they are off your report at the appropriate time. We were also once dinged for late payments, despite a glitch with the credit card company making it their fault not ours.

My recommended method is to check your credit report every 4 months, rotating agencies, that way you have a good chance of catching any mistakes pretty quickly. Since my husband and I share a lot of our debts (both names on the accounts) by running a report every 2 months on one of us I can consistently monitor our credit.

What about your credit score?

Credit reports don’t include credit scores, that magical number that the agencies use to determine your credit worthiness. The difference between under 700 and over 800 can mean thousands over the lifetime of a home loan for instance. Don’t know what’s a good score, an average score, or a bad one? Try checking out this informative post at Bargineering. So, how do you get your credit score?

There are 2 ways to obtain your credit score:
1) Apply for a loan: When you apply for a loan you are sometimes given the info about your credit score, although clearly this is not the time to figure out your score especially since it could cost you hundreds to thousands of dollars.

2) Use a website to get your credit score: There are several options that cost from free to over $30.

One site that makes it easy to get your free credit score, and sign up for credit monitoring is CreditScore.com. They offer a free trial that is outlined on the front page of their site. You can sign up for the free trial and cancel at any time. Should you choose not to cancel (or forget to!) you will be charged $14.95/month for credit monitoring. I’m sure most people don’t want to pay that much for credit report monitoring, but it does offer a few benefits.

Benefits to credit monitoring:

Most of us have a lot to do, and little time to do it. Despite organizers, computer calendar software and the ubiquitous post it note, you will likely forget to check your credit report regularly. While we were getting ready to move-remodeling, painting our old house and shopping for a new one, I completely forgot to check our credit reports and scores. We checked it originally in February, but when it came time to close on our house in July there was a ding on our reports. I mentioned it above, it was the credit card company’s fault, but we didn’t catch it in time. That meant our rate shot up about 1%, and there was nothing we could do but wait. It was removed from our report, and we did refinance, but we could have saved a ton of money and time by signing up for to receive a monthly credit report.

While it may not be something you need all the time, at time it does make sense to have someone else do the work for you, delivering your report right to your inbox.

If you can’t be trusted to cancel your free trial, and don’t want free credit monitoring I also recommend trying Credit Sesame.

When was the last time you checked your report and score?

Kelly

About Kelly Whalen

Kelly Whalen is the founder of The Centsible Life, a blog where motherhood and money meet. Her goal is to help readers live well on less. Kelly is a mom to 4, and loves that she can stay at home with her kids, and still pursue her passions for writing, personal finance, and social media. You can often find her on twitter and Facebook talking money and motherhood.

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