Your Credit Report (3/16/05)

I've seen and heard a lot of horror stories over the past eight years involving an individual's credit history. Your credit history is an easy thing to forget about, since most people don't pay attention to it until they need it the most.

Obtain your Credit Report
In case you haven't heard, Congress created a central website last year were you can obtain a free copy of your credit report: http://www.blogger.com/www.annualcreditreport.com. This service is not yet available to all people in the U.S. It became available to Missourians on March 1. You can check the website to determine the availability for your state. I've already used this website to pull my own credit report and it's a legitimate website and won't try to sell you additional services. Once you begin the process of obtaining your credit report, you'll need to provide some general information about yourself and it will ask you to verify your identity by answering a few questions. There are three main credit reporting agencies that you must choose from to get your credit report (Equifax, Experian, and TransUnion). I've had the best experience with TransUnion. On top of that, they are headquartered in St. Louis. So if you live in St. Louis, might as well support the local economy while you're at it.

What's it all mean?
The credit report is much more reader-friendly on this website. I won't go into all the details of the contents in the credit report. If you have any questions about how to read it or what something means, feel free to call me or e-mail me. I'd be happy to go over it with you piece by piece. They give you the option of paying them to get your actual credit score. However, I would advise against this unless you're planning on obtaining credit in the near future or the curiosity is killing you. I believe the cost is $5.95. If you decide to get your credit score, it's called a FICO score. It stands for the Fair Isaac and Company. It's call that because this company came up with the formula for getting the score.

Here's a summary of how they get the score:
The number can range from 300 to 900
35% of the score is based on your payment history.
30% of the score is based on outstanding debt.
15% of the score is based on the length of time you've had credit.
10% of the score is based on the number of inquiries on your report.
10% of the score is based on the types of credit you currently have.

Now you're asking, "what's a good score to have?" The answer: It depends on what type of loan you're getting and who you're getting it from. Generally, anything below 600 isn't good, 600-700 is decent, 700-750 is good, 750-800 is excellent, and 800 and up is flawless. I've only seen a few above 800. Many lenders have something called credit based pricing. This means upon credit approval, the worse your credit is, the higher your interest rate will be.

Beware
If you're in a bind with your credit, I urge you to be vigilant of companies that claim they can fix your credit history. I heard a claim on a radio advertisement the other day, "I can turn your debt into riches, no matter how much debt you have or how much money you make." This is obviously a bunch of crap. The only proven way to get out of debt is to spend less money than you make. It's a real simple formula, but not always easy to do. Remember, it could take several years. I recommend avoiding bankrupcy at all costs.