The three agencies have also formed a website, www.annualcreditreport.com, where you can request one FREE credit report per year. We also recommend you get your credit report directly through FICO’s web site at MyFICO.com. For $12.95, MyFICO gives you an analysis of your current score in plain English, based on your Equifax credit profile, as well as helpful tips on what specific factors most heavily affected your score and how you can improve it over time.
While the credit-reporting agencies can take up to six weeks to send you a report, MyFICO's report is available to you online for 30 days following the order date.
How to Read Your Credit Report
An agency credit report contains three sections, in addition to your identifying information — credit history, public records, and inquiries.
Section 1: Credit History
Apply Only When Needed!Credit inquiries take as long as two years to drop off a credit report, but every month, inquiries are dropping off and your score is going up. So try to apply for new credit only when necessary, and try not to apply for credit for at least three months when planning a large purchase. |
The credit history section is supposed to list your credit accounts and how much you owe on each one, as well as your record for keeping up with payments. Experian's reports will state whether you have a record of paying on time, as well as whether a creditor has ever "charged off" the account; that is, given up on collecting.
You will also see payment codes that are the credit industry's long-used method of grading your payment patterns for credit card accounts, installment loans, mortgages and lines of credit.
Section 2: Public Records
The public records section is a place you want to keep blank. It lists finance-related matters such as bankruptcies, judgments and tax liens. Most of these problems, however, do not stay on the report forever as long as you take care of them.
For example, a “Chapter 7 bankruptcy,” in which all of your debts are wiped out but your assets are sold and the proceeds distributed among your creditors, is supposed to be cleaned off your record 10 years after the filing date. A bankruptcy filed under “Chapter 13,” also known as "wage earner's bankruptcy," in which you set up a repayment plan, is usually deleted seven years after the filing date.
Less onerous reports, such as late payments or non-payments, settlements, and tax liens, should be deleted seven years after you make good on the problem. An unpaid tax lien can be reported forever, but reporting agencies often delete them 15 years after the filing date. However, recent changes in the law have made it more difficult to file for bankruptcy.
Section 3: Inquiries
The final section, inquiries, is a list of everyone who has asked to see your credit report. These are divided into two sections: "hard" inquiries, which you initiate by filling out a credit application, and "soft" inquiries, which come from companies that want to send out promotional information to a prequalified group or current creditors who are monitoring your account.
Having a large number of “hard” inquiries as a result of your applying for credit can affect your rating, because lenders perceive consumers who are seeking several new credit accounts as riskier than those who aren't seeking additional credit.
The good news about this, however, is that, contrary to a widely held belief, the impact is not that large unless the rest of your credit history is problematic.
Frankly, we could go on like this for hours. This report is just a small sample of the types of solutions you’ll find at Dolans.com.
There are a lot of pesky money questions and dilemmas out there — and you’ll find the answers and guidance you need at Dolans.com.
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Important Changes to the Way Your Credit Score Is Calculated
At a time when more people than ever are falling behind on their credit card, mortgage and auto loan payments, Fair Isaac Corporation, the creator of the popular FICO credit score formula, has introduced what they say is the most powerful upgrade to their scoring system.
Dubbed "FICO 08," it's supposed to do a much better job of predicting who will pay on time and who won't.
So it's more important than ever to stay on top of your credit reports and scores. Here are 7 ways that the new credit FICO formula changes could affect you:
#1: You Get A Little Leeway If You're Late
If you've ever missed a payment on an account that shows up on your credit report, you may have seen your credit score drop like a rock. With FICO 08, however, an isolated late payment affects your score less than it does now, provided that your other bills are paid on time.
But fall behind on several bills, and the impact to your score will likely be even worse. Keep in mind that, under any version of the FICO formula, a very recent late payment can have a significant impact on your score. If you've fallen behind, click here to get back on the right track.
#2: Small Collection Accounts Ignored
If you've ever had a bill wind up in collections, you know it can be a serious blow to your credit. And, it's even more frustrating when that collection account is due to something like a small medical bill that slips through the cracks.
FICO 08 will ignore collection accounts where the original balance is less than $100. That doesn't mean you shouldn't pay those accounts, of course, but it does mean they shouldn't hurt your credit scores.
If you've been unfairly treated by debt collectors, learn how to fight back.
#3: Avoid Debt? Watch Out!
This one falls into the “crazy but true” category. If you're one of those responsible people who does NOT have a car loan or mortgage, and you rarely use credit cards, you may see your FICO score drop because FICO 08 places an even greater emphasis on a solid mix of credit types. It's completely absurd, but that's the way it is.
It's better for your credit score if you have both installment and revolving accounts. An installment account includes a car loan, student loan or personal loan.
#4: Maxed Out? Watch Out!
You may have heard that it's a good idea to keep your credit card balances below 50% of your available credit limit. But the ideal ratio is actually closer to 10%!
With lenders closing accounts and lowering credit limits for even the most creditworthy customers, it's getting harder and harder to maintain a low "utilization" ratio. FICO 08 will be even harder on consumers who get close to their credit card limits–just one more reason to pay down those balances!
Now that you know how your score is calculated, let’s look at ways you can clean up your credit score.
4 PROVEN Steps to Clean Up Your Credit Rating
You have your latest credit report in hand. You know your credit score. We’re sure you must be asking, “Okay, Dolans... now how the heck do I clean this thing up?”
So what follows are four time-tested steps to clean up your credit and raise your score. Keep in mind we’ll spell out more details later in this report, along with a few other tips that may surprise you. For now, get started with:
STEP 1: CHECK REGULARLY
Warning: Beware of Rate Shopping! If you have been "rate shopping" for a mortgage or auto loan, this action should be counted as a single inquiry. Contact the credit-rating bureau if you've been penalized for your thoroughness with a list of multiple inquiries. Typically, inquiries are purged from the credit bureau files after two years. Here's one more strong reason, as if you need one, to throw out – after shredding – all of those unsolicited credit card offers that clog your mailbox and, nowadays, your e-mail box, too. Americans get bombarded with more than 3.5 billion credit card offers a year. Don't succumb to temptation. |
Now that you have a copy of your latest credit report (see page 2 for details on how to order it), be sure to get a new one once a year.
First…go through your report with a pen, and mark things you think are inaccurate or incorrect. If you see something inaccurate, make sure you dispute it with the Credit Agency. We’ve outlined specifics on how to do just that on page 4 of this report.
STEP 2: PAY ON TIME
Don’t forget that payment history is the single most important factor in determining your credit score, making up 35% of the total. Put positive credit information in front of the bad. Prevent any new red marks from showing up on your credit report from now on. Today, make sure you're not behind on any payments.
You may consider having your bills automatically deducted from your bank account or pay them online before they are due. Being consistently late with payments is the easiest way to lower your score. Conversely, if you’re consistently on time, your credit score will improve month after month.
Even if you can only swing the minimum payment (not a good idea), get the payment there before the due date. Most credit card companies allow you to pay online, so, if you feel comfortable doing so, make sure you take advantage of this and don't waste time and money on stamps and mailings.