Trying to improve your credit score is a common New Year’s resolution for consumers. They start out with the best intentions but the problem is, that they usually don’t know where to begin. It can be confusing and complicated figuring out how to get your credit score or why credit reports don’t include your score automatically. Furthermore, television ads promising a free credit score (you know the annoying commercial) aren’t really free at all.
Unlike your credit report, which is required to be issued to you for free each year. Your credit score is usually not free (check see this free offer. But there are a few creative ways that you can get it for free.
For example, if you have applied for a new residential mortgage, car loan or other type of installment line they issuing bank must give you a copy of your credit score. If their decision will be based on your score, then the lender must provide you with the actual number as well as give you a written notice with contact information for the issuing credit bureau. Major mortgage companies like Fannie May require all 3 credit scores and so you will get access to those free.
Another good option is to get a subscription to id theft program like credit info and monitoring services usually offer a free 30 day trial for their services and they provide you with your scores. These are a good choice for consumers wanting to stay abreast of any changes to their credit history and that are truly committed to improving their standing. Just make sure you cancel your trial before your 30 days are.
Of course, you can always pay for your score outright. Each with of the major credit reporting agencies at the same time you get your annual credit report. There are also several 3rd party companies that can give you a ‘estimate’ of your credit score from the data provided in your credit reports. Most of these are fairly accurate but make sure you check with the better business bureau before giving anyone access to your sensitive financial data.
In our experience, it is probably not worth it to pay for your score. The primary reason for this is that the companies selling the scores do not have to give you actual credit scores. Often times, they will sell you a estimated score that they based off of their own algorithm. These are usually created in order to help consumers better understanding their credit scores. But when each lender may be using a different formula to calculate your number, it can be overwhelming for consumers to make sense out of the number they get. So even when you get a good score, you can’t be overly confident that the score you bought will the be version that your potential creditor will use.
This is the primary reason that the Fair Credit Reporting Act does not mandate your ‘score’ to be included in each credit report. The main thing is to review your report and check for fraud or mistakes. If you do manage to qualify for a one time credit score for free, by all means go for it. You can never be too informed when it comes to your financial standing. Otherwise, we recommend just monitoring your report at least once per year to look out for obvious inaccuracies or errors. That is the single easiest way to keep identity thieves or unauthorized use of your credit from doing major damage to your finances. It also helps you keep away from junk debt buyers at bay when they harass you.
Most credit bureaus acknowledge that around 25% of their reports contain errors. Think about that for a second. One in four credit reports have a mistake! Imagine how that might feel if you don’t ever check credit reports? That mistake could cost you thousands of dollars on a mortgage or car loan.
Who are most likely to have an error on their credit report?
If you have a fairly common last name (Jones, Davis, Thompson) your chances for finding an error go up substantially. The same goes for recent divorcee’s, as their report may contain financial information from their former spouse. If you are in the military and have been stationed all over the globe, you will most likely have problems with your addresses. Each of these can be costly but are really easy to fix. If you correct these errors before you apply for a loan, you will be helping yourself save money in the future.
A good example of an error on a credit report happened to a friend of mine when they relocated for a new job. They had always had good credit reports but had recently had their PO Box broken into. At the time, they didn’t think anything of it- they reported the problem and the USPS issued them a new box number. Fast forward 4 months and they had 3 new lines of credit opened up over a 2 week span. They didn’t find out until they applied for a new rental and they got poor scores on their report from their landlord. The good news is that the were able to successfully dispute the charges and have the fraudulent accounts immediately closed. However, it did cause a disruption for them on their new rental and they had to settle for short-term housing until they got their reports fixed.
So regardless of your current financial status, it makes sense research the top monitoring services and to take a pro-active role in fixing any errors before they create problems.