How to Monitor Your Credit Score (for free, without hurting your credit)
Meet Susan. Susan’s credit score has always been something of a mystery to her. If you asked her, she could give you a vague idea of what range her score is probably in, based on what they said at the bank three years ago when she last opened an account. A friend told her that it’s good to always pay off your credit cards on time. Another friend told her that it’s okay to carry a balance. She doesn’t know how long bad marks stay on her record, but she assumes they go away after a while if she is consistent with her payments. She heard some conflicting advice from family members about how to check her credit score, so usually she doesn’t bother. Why risk hurting her score with another inquiry? That’s how it works, right?
Do you ever feel like Susan? We know that having a good credit score is important, especially when we want to make big purchases such as buying a car or a house. But it seems so complicated and confusing… How do we keep track of our credit score? How do we improve it?
Let’s start with the basics.
In short, your credit score represents your reputation for repaying your debt on time.
There are several scales for your credit score (FICO is the most popular, though Vantage is gaining some ground). Generally speaking, your credit score can range from 300 to 850, with 850 being perfectly amazing. However, most people have a score somewhere between 400 and 800. Each agency has slightly different thresholds, but usually below 640 is poor, 640 to 680 is considered good, and 720 and up is considered great.
Your score is based on several factors:
- The number of open accounts you have (good or bad)
- The ratio of your balance to your credit limit
- The length of time your accounts have been established
- Any derogatory remarks in Public Records (found on your credit report)
Here’s a more specific breakdown:
Contrary to popular belief, your score has nothing to do with your income or the credit limits on your accounts. Various aspects of your credit behavior are used to create complex mathematical formulas that credit reporting companies use to generate your credit score. Thus, as your credit behavior changes, your credit score changes accordingly. It makes sense, then, to regularly monitor your credit.
What does your credit score look like?
The best way to find out where you stand is to get a credit report. A credit report (also called a credit file disclosure) is simply a listing of your credit payment history, according to your creditors. It is there mainly to help a lender quickly decide whether or not they should grant you credit when you apply for a loan. It gives a much more thorough picture of your credit than a number.
Checking your credit doesn’t affect your score, as long as you do it properly. That means 1) you don’t check it too often, and 2) you only check it through the official, reputable sources. A third rule would be that you should never pay to pull your credit report. You are legally entitled to one free report from each of the nationwide consumer credit reporting companies each year.
There are three consumer credit reporting companies: TransUnion, Experian, and Equifax. Since you are entitled to one report from each company per year, that means you can get up to three free reports in one year, without affecting your credit score. While some people pull all three reports at once, I recommend that you pull one report from each company every four months. This way, you can have a better ongoing picture of what your credit looks like throughout the year.
You’ve probably seen numerous ads on the internet for free credit reports, but most of them are not free. Most of them will charge you some sort of “convenience” fee for looking up your reports for you, and they harvest all of your personal information. The most notorious offender is freecreditreport.com, which you should never use. It is not free.
The official site that you should use is https://www.annualcreditreport.com/. This site is secure, free, and it allows you to choose which agency you want to pull your report from. Make sure to keep track though, so that you rotate between agencies every four months.
Your credit report will include:
- Personal information, such as name(s), birth date, and social security number
- Previous and current addresses
- All of your credit history for the last 7 to 10 years (with information about each account — including whether each individual monthly payment was late or on time)
- Public records and collections information
- Regular and promotional inquiries — who requested information about your credit history
This is the same information that lenders see when they pull your credit report. Whether it is a bank deciding if they should give you a mortgage, or a dealership deciding the interest rate on your auto loan, now you will know what might make them shake their head. When you get your credit report, make sure to carefully look at each section. Find any items that may be bringing down your score, so you know exactly what needs to change.
The free credit report will not include:
I know, that would be too convenient. It would also make sense. To find out your FICO score, you can always ask a lender for the results of their inquiry when you are seeking a loan for a car or home. However, at that point it’s already too late to improve your score. That’s why you need your credit report — to tell you the why behind the number. Once you know the why, you can fix whatever needs fixing, and the number will improve accordingly.
Update: Another option to find out your credit score for free is to use Credit Karma. They are a truly free service, and they don’t even ask you for a credit card when you create your account. You can sign up and see your TransUnion score in under 2 minutes. They also have a very useful “Credit Report Card” feature which can help you identify problem areas, if you have any.
Here are some general guidelines to follow when it comes to your credit:
how many credit reports are you legally entitled to each year
You can request and review your free report through one of the following ways:
Atlanta, GA 30348-5281
You can request all three reports at once or you can order one report at a time. By requesting the reports separately (for example, one every four months) you can monitor your credit report throughout the year. Once you’ve received your annual free credit report, you can still request additional reports. By law, a credit reporting company can charge no more than $12.00 for a credit report.
You are also eligible for reports from specialty consumer reporting companies. We put together a list of several of these companies so you can see which ones might be important to you. You have to request the reports individually from each of these companies. Many of the companies in this list will provide a report for free every 12 months. Other companies may charge you a fee for your report.
You can get additional free reports if any of the following apply to you:
- You received a notice that you were denied credit, insurance, or employment or experienced another “adverse action” based on a credit report, you have a right to a free report from the credit reporting company identified in the notice. To get the free report you must request it within 60 days after you receive the notice. Other types of “adverse action” notices you might receive include notice of an unfavorable change in the terms or amount of your credit or insurance coverage, or unfavorable changes in the terms of your employment or of a license or other government benefit.
- You believe your file is inaccurate due to fraud.
- You have requested a credit report from a nationwide credit reporting company in connection with the placing of an initial fraud alert (you may request two free copies for an extended fraud alert).
- You are unemployed and intend to apply for employment within 60 days from the date of your request.
- You are a recipient of public welfare assistance.
- Your state law provides for a free credit report.
Be cautious of websites that claim to offer free credit reports. Some of these websites will only give you a free report if you buy other products or services. Other websites give you a free report and then bill you for services you have to cancel. To get the free credit report authorized by law, go to AnnualCreditReport.com or call (877) 322-8228.
The content on this page provides general consumer information. It is not legal advice or regulatory guidance. The CFPB updates this information periodically. This information may include links or references to third-party resources or content. We do not endorse the third-party or guarantee the accuracy of this third-party information. There may be other resources that also serve your needs.
We’ll forward your issue to the company, give you a tracking number, and keep you updated on the status of your complaint.
What Do Employers See When They Check Your Credit Report?
You’ve made it past the phone interview and two in-person meetings with your potential supervisor and the hiring manager. You might think to yourself, “I nailed it! This job is mine.” Then you find out the company wants to screen your credit report before extending you an employment offer. Joy can quickly turn to panic if you’re not sure what they’ll find.
Some employers review candidates’ credit reports as part of the employment screening process. Most of these companies are in the finance, defense and pharmaceutical industries. Credit reviews have become a common practice in these fields because personnel have access to sensitive information. These employers want to get a good sense of someone’s character before bringing them behind closed doors. However, not every state allows employers to view candidates’ credit reports. Many of those that do are reconsidering the practice, as some legislators believe it can adversely affect job seekers, especially those who may have fallen behind on their obligations due to the economy and other factors beyond their control. Also, it’s a review process put in place mostly for full-time roles, so if you’re looking for a little extra seasonal income helping out evenings and weekends at the mall, it’s unlikely to be a factor in that hiring decision.
A potential employer – or anyone else – must have your written consent to view your credit report. After you’ve given the go-ahead, they’re provided access to a limited version of your report. These reduced reports contain much of the same information you’d find on a traditional credit report, with a few exceptions. Employers receive your Social Security number, address, employment history, public records information and your credit information just as a lender would. Account numbers, your date of birth and information about your spouse are all screened to comply with Equal Opportunity laws.
If the information in your report negatively impacts your employability, you’re entitled to a copy of your credit report and a written description of your rights. You can use this information to identify and address the items that held you back from employment, whether they’re high balances, late payments or maybe both. Some credit reporting agencies have adopted polices to better support consumers who may have some dings on their credit report. For example, Experian recommends that employers not deny employment solely on an individual’s credit profile. It encourages employers to have open dialogues with candidates so they can clarify any areas of concern.
Obviously, you’d like to avoid a situation where your credit gets in the way of gainful employment. It’s always a good idea to review your credit report before beginning a job search. You’re entitled to receive a free copy of your credit report from each of the three credit bureaus each year. Request your reports and look them over closely. If anything seems out of the ordinary, follow the included instructions to address any of your concerns. Regularly checking your credit reports helps you keep surprises at bay.
This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.