Time for a Year End “Check-Up”
Often, when I ask clients or their families about checking their credit reports, I get silence and blank stares. Sometimes I am told, “No need, my credit score is high. I own my home, have several credit cards and pay my bills on time.” Rarely does anyone say they consider getting one and checking it as part of an annual “financial check-up,” nor does it seem there is a general understanding of what a credit report is and why you might want to review it.
Here are some basics to help explain why I think requesting and reviewing a credit report at least once a year is basically preventative care for your financial health.
What is a credit report?
A credit report is a record of your credit history that summarizes your credit related activities. The report includes:
personal identifying and employment information
payment history for 10 years of all your credit cards and loans, including mortgages
requests from others for your credit report including lenders (within the past year) and possible employers (within the past two years)
public record information such as bankruptcies, tax liens, and child support judgments
How is a credit report used?
The personal and financial information in a credit report and the credit score that represents this information, is used by creditors and others as part of their decisions on a myriad of applications. Credit card companies, landlords, insurance companies, employers as well as those who finance larger purchases such as a car or a home, all review your credit report to determine your credit worthiness. The rate you get for a loan will depend on the information in your credit report and your credit rating.
Why review your credit report?
Since this report is so widely used by others in decision making, reviewing it for accuracy is plain common sense. Errors limit your ability to get credit and may even result in you being denied a job or financing for a home.
Another important reason to review the report is that it can be an early alert to fraud and potential identity theft. Review the report to make sure that you recognize all of the names and accounts on it, and to confirm that no one has opened an unauthorized account in your name.
Who issues credit reports and how much do they cost?
There are three major credit reporting companies:
Equifax
Experian
TransUnion
It is worth noting that not all businesses report to all three companies so the reports will not be identical.
How much do credit reports cost?
Federal law mandates that you can ask for one copy of your credit report from each credit reporting company for FREE! Yes, that means three free reports, one from each company. TIP: If you request one from a different company every four months, you can monitor your credit regularly at no cost to you.
How do I get my credit report?
Free reports come from www.annualcreditreport.com, the official site authorized by the federal government for credit reports.
There are three ways to obtain your free credit reports:
Online at www.annualcreditreport.com
This is the fastest way to get your credit report. The online process requires you to answer some questions to verify your identity. Once done, your report is immediately available.While it sounds easy, it may be daunting. The questions can refer to events that occurred years ago and may relate to things such as car loans or mortgages you had. What if you or your loved one (if you are helping someone else) don’t know the answers to some of the verification questions? If that is the case, there are two other options:
By telephone: Call 877-322-8228 (toll free). You will go through a verification process over the phone. Once verified, the report will be mailed to you within 15 days. Again, if the verification process is not successful, there is one more way to obtain your report.
By mail: This is the slowest, but best way to obtain a report if you don’t think instant verification is likely. Complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. The report will be mailed to you within 15 days. You may be asked to provide additional information/documentation in order to process your request. If so, the consumer credit reporting agency will contact you by mail.
NOTE: These are the only ways to obtain FREE credit reports. If you go directly to the credit reporting agencies, they may charge for the report. Also, beware of other companies that offer “free” reports. They are not usually free.
Freeze Your Credit If You Aren’t Using It
Even if your credit reports look perfect, there may be times when you would prefer that the credit reporting agencies not give out any information about you. That refusal by credit bureaus to disclose your credit history and activity is what is known as a “credit freeze,” and no discussion of obtaining and reviewing your credit report would be complete without its mention. In 2018 a law went into effect that makes it free to freeze your credit.
If you lose your wallet or misplace credit cards, you may decide to freeze your credit for peace of mind. This action will help to protect you against fraud while you cancel and replace all you lost. While your credit is frozen, any attempts get credit open accounts in your name will be stopped as credit checks will be impossible to complete.
After some time, you may decide to unfreeze your credit so you can legitimately use your own good credit for things like a new credit card, a car loan, a new home, or reference for a job. You must contact each credit reporting bureau individually to freeze and unfreeze your credit.
Equifax: 1-800-349-9960
TransUnion: 1-800-909-8872
Experian: 1-888-397-3742
Note: Make sure you store any passwords needed to “thaw” your credit somewhere safe, where you can access them.
If you are still unsure that any of this applies to you or your family, think of all the things you do for your physical health, even before you need to. In the same way, paying attention and attending to preventative financial health may help you avoid being a victim of fraud and may save you time and money.
Obtaining, reviewing, and correcting credit reports is just one of the many services we provide to our money management clients. If you are interested in a free consultation, please contact us or call 301-801-2294.