Years ago, checking your credit report and knowing your FICO score was a challenging task and few of us ever bothered. It also took time, because in many cases you had to write to each credit bureau and ask for your report. These days, with the increase of readily available credit, and the constant threat of identity theft, checking your credit report is more vital than ever. With online access to the bureaus and services such as Credit Karma and Credit Sesame, it’s now easier than ever to access and monitor your credit report.
Knowing and guarding your credit report and FICO score is very important. Your FICO still dictates the best rates on loans, and even determines whether you can obtain a service, or in some areas, even qualify for a job, although this is changing. For example, here in California, and now six other states, an employer can no longer use a credit check to determine whether you are eligible for a job. There may be exceptions, such as for law enforcement, justice department, and certain higher management positions.
In addition to the FICO score created by the Fair Isaac Corporation, we now have a VantageScore which is a scoring system created and maintained by the three major credit reporting bureaus. There are differences in the scores. For example, VantageScore will use information on a consumer account that is only one month old. FICO utilizes data that is at least six months old. The original VantageScore top score was 990 whereas the FICO top score was 850. Now, both models align at the upper end and 850 is the top score for both.
How should you go about monitoring and reviewing your credit report? The first thing to know is that consumers are entitled to a free credit report every twelve months. You can contact Experian, TransUnion, or Equifax directly and ask for a copy of your credit report. You can also sign up for one of the aforementioned services such as Credit Karma or Credit Sesame. Consider getting your full report from each of the agencies to compare. I recommend doing a thorough check of your credit report each year in November, prior to the holiday shopping season, and again after the holiday season.
So, what to look for? You want to start with all of the basic information. Make sure you check your name and every iteration of your name that you use. Check to make sure your current contact information is valid and up to date. Review the prior historical entries as well. If you see an address used where you never lived or had any association, this could be a red flag. That’s a topic to explore.
You then want to focus on your lines of credit. These are the active credit accounts you have such as credit cards, store cards, mortgages, auto loans, etc. Review these and make sure the payment you are making is being reported correctly and that none of the lines of credit are reporting that you are paying late, or worse, in collections. You also want to make sure that the lines of credit reported are yours! If you review your file and it shows an account you are unfamiliar with, or do not have, this needs to be explored further. For example, there may be a department store charge account showing on your report that you no longer use or didn’t remember opening. Confirm that this is actually your account.
If you do find an error or an open line of credit that is definitely not yours, notify the reporting bureau and start working to rid your report of the error immediately. You will need to directly contact the bureau reporting the account and follow their account dispute resolution process. Disputing and removing errors can take time, so don’t put this off or let it slide. Be sure to document your efforts. When you approach the bureau reporting the erroneous account, you should ask them to provide you details on what the account is, when it was opened, and who supposedly opened it. These are the basic questions to ask the bureau reporting the account. Don’t be surprised if they don’t know the answers or are thin on details. Just work on getting all the data you can and be sure to create a written record that you are officially disputing the account with that particular bureau.
Knowing your credit history and checking it periodically is a great way to keep your credit in good shape and to understand your credit history. Seeing your file and all accounts at a glance is also a good way to keep track of your debt and spending. Being aware will help you build a better score. Read more at How to Improve Your Credit Score.
For disclosure, Engage Advising has no professional relationship with any company mentioned herein and is not responsible for third-party information. The references are provided solely for informational purposes.
As an independent Certified Financial Planner™, I can help you understand your credit, prepare a debt payment strategy, and help clean up your credit profile. Contact me and let’s get started! #talktometuesday #education #Hireaplanner #stressfree #FICO #FICOscore #savings #debt