There’s a lot of disinformation about credit reports and credit scores out there. So much disinformation that a new Federal Trade Commission rule forces companies offering “free” credit reports to disclose that the reports are not truly free but require a subscription to paid credit monitoring services. Further, these companies must point consumers to the only web site that truly offers free credit reports: AnnualCreditReport.com.
It’s important to keep on top of your credit score. One reason for this is that many auto and home insurance companies use your credit score as a factor in calculating insurance rates. While your “insurance risk score” is slightly different from your credit score, they tend to rise and fall in similar ways.
With this in mind, I decided to check my own credit reports and credit scores, to see how the process really works, and to offer some tips to others who may find it confusing.
Credit report vs. credit score Credit reports and credit scores are not the same; the terms are not interchangeable: • Credit report: shows your credit history, including open and closed credit card accounts, mortgage loans, and auto loans. A credit report also shows past bankruptcies, late payments, and other red flags to potential lenders. But given that this is a credit report, it won’t show all your financial information, savings accounts or investment accounts. You are entitled to get your credit report free, no strings attached. • Credit Score: an actual number, calculated from your credit history. The details of your credit report are used as data points in a mathematical equation; the resulting score gives lenders a fast appraisal of how risky it is to lend you money. The higher your credit score, the more likely it is that lenders will look at you kindly. Credit scores are not free, you can purchase them through the same credit agencies that supply you with your credit reports.
Getting your free credit report To begin my journey, I went to AnnualCreditReport.com. This is the only official site that allows you to receive your credit report for free from the three major credit reporting agencies — Equifax, Experian and TransUnion (note that you can only get your free report once per year from each agency, but you can stagger your requests — for example, you could get your credit report from Experian today, then request your TransUnion report 4 months from now).
At AnnualCreditReport.com, I selected my state of residency, then filled out the personal information needed to generate my report. From there, I could choose the agency I wanted to see a report from. I began with the intention of getting credit reports and credit scores from all three agencies.
Equifax Equifax was the first credit agency I went to, and it turned out to be the one offering the most satisfactory experience. I answered a few questions to confirm my identity and then my credit report appeared. It showed that I had 9 open credit or loan accounts, 7 closed accounts and 1 duplicate account (which I need to take care of). It showed my payment history, with no late payments anywhere. (I know I’ve been a day or two late on some payments, but those didn’t show up, so it appears that only payments that are truly late, 30 days or more, actually hurt you.)
The report also showed which companies had looked at my credit report in order to consider me for pre-approved offers or other promotional offers. My report had been accessed 13 times, including multiple inquiries from the same companies in many cases — for example, DirecTV had checked on me twice.
Equifax also gave me the option to buy my credit score for $7.95. This is much cheaper than any offer I could find when going directly to the Equifax site, so you get a bit of a deal if you buy during your visit from AnnualCreditReport.com.
I bought the report. I was happy to see that my credit score is 787, on the high end of a range that goes between 280 and 850. In addition, I got a printable page that told me what the score means and why my score wasn’t better. I was surprised to see an account that had reportedly gone to collections! I do not remember this. Nevertheless, my high score earns me good rates on most loans, including credit cards. With average credit card debt over $7,300 per household, having a better credit card rate can have a significant long term effect on the amount you spend on interest.
Experian My credit report from Experian was similar to that of Equifax. But it contained more information, especially in terms of past accounts that are now closed. I learned that someone had done a background check on me within the last year and that a resort in Texas had checked my report. (They must not have liked it; I can’t remember getting any solicitations from them.)
Experian also offered to sell me a credit score, but it wanted me to sign up for some long-term credit monitoring product first. No, thanks. I went to the Experian site separately, however, and found they sell a “PLUS Score” for $14.95. I bought it, and found my credit score from Experian was very close to that I’d received from Equifax. (In the interest of not exposing too much of my personal information, I’ll keep the actual number to myself.)
TransUnion Last, and least, was TransUnion, an unsatisfying experience. First, TransUnion forces you to create a login ID and password to get your credit report. Second, it forces you through a lot of extra screens in order to “upsell” you other credit products before you can obtain your credit report.
When I finally got the report, it was similar to the first two, although it went back a little further in terms of tracking accounts. The report showed even more credit inquiries from companies wanting to send me promotional offers — 15! Between the three agencies’ reports, there were over 30 inquiries in the past year!
I wanted to buy a credit score from TransUnion, but I could not find any product with a price I could stomach. As far as I could tell, my choices were either paying a one-time charge of $29.95 or taking a “free trial” that would actually cost $14.95 per month if I didn’t cancel it. Although my intent was to buy a credit score from all three agencies, I couldn’t in good conscience give TransUnion any of my money.
My Recommendation I highly recommend obtaining your credit report from all three reporting agencies. It’s free through AnnualCreditReport.com, and seeing the reports can help you in a number of ways: • You get a one-page overview of your financial history that shows how well (or how poorly) you’ve used credit. • You get the opportunity to spot any incorrect information that may affect how you are treated by lenders and other creditors. • You get to see which companies are targeting you via credit inquiries, and how often.
As far as getting your credit score, my recommendation is to spring for the $7.95 score offered by Equifax when you go to the site via AnnualCreditReport.com. The price is right, there’s no extra hassle, and it’s likely that the score you receive from Equifax is very close to that used by the other credit reporting agencies. I would not bother buying your credit score from more than one agency.
Conclusion The credit reporting and scoring industry is very confusing, and is made more so by the credit agencies’ attempts to get your money at every turn, even when much of the information you’re looking for is free. Still, it is important to know what information these agencies are keeping about you, because that same information is being used by lenders to make decisions about your financial future. Go to AnnualCreditReport.com and get started — but be careful out there.
Adam Jusko is the founder of IndexCreditCards.com, a website that tracks credit card rates and over 1,200 different credit card offers including cash back credit cards and 0% balance transfer credit cards.