Credit Report

I was browsing Dave Ramsey’s website and came across I’ve seen so many gimmicky ads on television promising access to a free credit report, but the fine print reveals that they all have strings attached, like “Offer involves enrollment in . . . ” so the report is free but the attached strings are not.

Luckily, we all get access to our credit report for free as stipulated by government regulation. You are entitled to one report each year and the big three credit bureaus will allow you access to yours annually. Enter Annual Credit Report. It is recommended by Ramsey because it truly is free, with no strings attached, and works with the credit bureaus directly. TransUnion, Equifax, and Experian are the three credit reporting agencies that hold the keys, as the gatekeepers, to what your credit report is made up of, and thus the determination of your FICO or credit score. You’ll still have to pay (about 8 bucks) for your actual score, but if your report is good and clear, then your score will be good, no matter what the actual number is.

It’s good to take a look at your report from each agency once a year to make sure that there aren’t problems developing that you aren’t aware of. Someone may try and take your identity and open up credit card accounts, or like what happened to me, I found that a credit card that was supposed to be canceled long ago was actually still showing open. 78% of people have some sort of incorrect record on their credit report, like current employer, address, or worse, an incorrect late payment status. If you pay all your charges on time and don’t miss payments, you’ll have a decent score, but the FICO score also takes into account how much credit you have, and how much debt you have.

As far as the scores go:
Below 600 is bad.
600-700 is so-so, but you won’t get the lowest rates for loans.
720 and up is considered good.
850 is the top (0.5% of America sits here).

Things that can increase your score are things like how long you’ve had credit with one company. Keeping a credit card from college onward shows that you can be responsible for a long time and there is a long history on your credit. Keeping the ratio of your spending to credit available to around 10% helps too. If you have $20,000 available on a credit card, don’t spend more than $2,000 a month to boost your score. Don’t have too many credit cards and never sign up for things like “90 days same as cash” plans. When you buy your next couch, don’t pay zero interest for a year, just pay for it in full. These zero interest plans are usually used by people who have a hard time paying for things and you’ll be put in that category.

Ultimately, your score isn’t all that important, but your report is. If you aren’t about to buy a house or get a loan for a car, then who cares if your score is 700 or 800? As long as you are responsible with the credit you do have, your score will take care of itself. My score, 760, is actually lower than I thought it would be, but then after thinking about it, I could see why: I’ve only got one credit card, and I’ve only had it for three years. My older cards have all been cancelled, so I don’t have the history the credit bureaus like to have. I don’t have much debt (except the mortgage) and that hurts the score too. But so what? I’m not going to pay interest charges on a new loan just to boost my score. As long as you are above 730ish, you’ll get the same interest rates as someone who has an 850.

Make sure you stay on top of your payments, allow your actual score to suffer a bit for the sake of getting out of all debt, and make sure you credit history looks good by checking your report once a year, for free, at AnnualCreditReport.

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