Highlights of today’s show:
- What is the difference between a credit report and a credit score
- Why you need to monitor your credit report
- How to get your credit report for free
- How to fix errors on your credit report
- Monitor your report even if you aren’t planning on borrowing money
Why are we talking about the credit report today? Because according to reports, about 25% of credit reports contain errors, although only about 2% of them could impact you getting a mortgage or not. But even if you aren’t getting a mortgage soon, checking your credit report at least once a year is highly recommended.
Sometimes, though, we can get mixed up and think that a credit report is the same as a credit score. The credit report is your scorecard. It lists your name, address, current debts, and old accounts that have been paid off and closed, as well as old outstanding debt. Your score is derived from your report and was designed to help creditors determine one’s credit worthiness. Some people have instead used their credit score as a way to measure how well they are doing financially.
You might be asking then, if I am not going to borrow money anytime soon why do I need to care about my credit report? There are several reasons including to determine if you have had your identity stolen and in case you change jobs, more and more employers are looking at the report.
To get a free copy of your credit report visit annualcreditreport.com. That is the only place to get a free copy. There are other places that offer a “free” credit report, but only if you subscribe to their monthly credit monitoring service. Remember there is no need to pay for a credit report and you are entitled to get one free credit report from each of the three credit bureaus once every 12 months.
Thankfully this has never happened to me, but fixing errors on your credit report can be quite difficult and time consuming. To correct an error you will need to send a letter to each bureau that you would like to correct the error. In the letter you will need to send it certified mail so you get a receipt of when they receive the letter and include your name and address, identify what you are disputing, explain why you are disputing what is in your report, and include copies of documentation that will help your case. Also send the same letter to the creditor in question so they have a copy as well. If the error is sustained it will be removed from your credit report.
To me, checking your credit report at least annually is another way of improving your economy and taking control of your finances. You don’t want to ignore your report and have something come back to haunt you later on. Fixing errors on your report is not a fun process, but it’s what you have to do to get them to go away. They won’t disappear on their own if you ignore them.
To read and listen to more on what I and others have written about the credit report check out the following links:
- Does your credit score matter?
- What your FICO score is and isn’t
- Don’t be defined by your credit score
- Do you need a FICO score if you are not borrowing money
- Don’t be fooled by the build your credit score lie
I also have special news for those listeners who have an iPhone. The JW’s Financial Coaching app is now available to download. The app allows you to choose a lesson, view its show notes and listen to the show, all right from your iPhone without having to browse the web.
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You can find prior editions of the podcast at the podcast archive page.