Your Credit Matters

 Posted by on June 10, 2011  Add comments  Tagged with: ,
Jun 102011
 

Though we hope to never borrow money again, my husband and I are very careful to protect our good credit rating, because it’s impossible to know what the future holds. We obtain our free annual credit reports from each of the three credit reporting agencies through AnnualCreditReport.com. According to the FTC, this is the only authorized site where you can obtain the free report you’re entitled to by law, according to the Fair Credit Reporting Act. There are no strings attached, and nothing to buy. Don’t confuse this site with other sites that have similar names, where you usually have to sign up for credit monitoring programs in order to get your free report.

Credit reports contain important information about your payment history with your creditors, inquiries made by financial institutions, and public records such as judgments, foreclosures or bankruptcies. Consumer reporting companies collect and sell this information to lenders and other businesses, to assist them in making credit-granting decisions. Your credit record can influence the interest rate you’re able to get on loans, your insurance rates, and even your ability to rent an apartment or get a job.

We examine our reports carefully, and rather than getting all three reports at once, we stagger them so that we can monitor our credit closely throughout the year. We get our reports according to the following schedule:

May 31: Experian
September 30: Trans Union
January 30: Equifax
May 31: Experian again, and then we repeat the whole process.

This system allows us to monitor our credit for accuracy and signs of identity theft, and correct any errors right away. We have found errors, which is why I’m such a big proponent of getting your free report regularly!

Reports ordered on the web site can be viewed and printed immediately upon verification of identity. You can also order your report by phone or mail if you aren’t comfortable with giving personal information over the internet. I keep the current year’s credit reports in the “Finances” section of my HMG, and shred them in a cross-cut paper shredder as I get new ones.

There is a common misconception that ordering your credit report can negatively impact your credit score. This is false! There are two types of inquiries – “soft” inquiries, which do not affect your credit score, and “hard” inquiries, which do.

Some examples of “hard” inquiries:
-Mortgage applications
-Auto loan applications
-Credit card applications
-Personal loan applications

Some examples of “soft” inquiries:
-Your personal requests to credit bureaus for copies of your credit report or score
-Use of credit information by your existing creditors for account review
-Use of credit information by lenders for pre-approved credit offers
-Inquiries used in making employment decisions
-Inquiries from landlords to screen potential tenants

Soft inquiries are listed on credit reports requested directly from the credit bureaus, but they are not seen by potential creditors.

After you get your report, check to make sure that your personal information is correct. Then check payment histories and account information for errors. If you find errors, the procedure to correct them is usually detailed on the last page of the report.

But what about your credit score?

Your credit score is different from your credit report. It’s a three-digit number, which is based on your credit history. Lenders use it to estimate their risk when lending to you, with the assumption that the higher your score, the more likely you are to pay on time.

FICO scores range from 300 – 850, and most lenders consider a score above 700 to be very good, with the very best rates going to people with scores above 750. A score below 620 is considered high risk.

Your credit score is not included in your credit report – you have to buy it separately. However, if you don’t want to spend the money, you can estimate your credit score here for free. This site asks you general questions about your credit history (the answers can be found on your free report!) and then provides you with a range that your score probably falls in. Based on the last time I got my score, the range it predicted for me was correct, so I think the method of estimation is probably pretty accurate.

Switching gears…last year I had some business cards printed for my blog because my husband asked me to. God bless him, he’s a chatter, and when he’s out and about, he just loves to tell people about my blog, and when they ask for the address, he gives them a card. Apparently, the card stash in his wallet has run out, because this morning, I received this email from him:

Dear Heather, at Want What You Have, I have composed this new song. I expect it to go platinum or (at minimum) top 40.

Sung to the tune of “Oh, Christmas Tree”

Oh Business cards, oh business cards,
How much I need to get them.

Oh Business cards, oh business cards,
How much I’d like to have them!

I like to tell folks all a-bout,
how frugal li-ving helps them out,

And when they laugh a-long the way…
They’ll know they’ve found a real gem.

Sincerely,
Your husband

You gotta love him.

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