Getting to the Nitty-Gritty of Credit Reports


What does buying a car, purchasing a house and getting a credit card all have in common (well, other than money)? Your credit score.

Before a bank or any other creditor will let you borrow money, they will check your credit report. This report lets creditors see how you handle your debt and lets them know whether or not you will be an asset or a risk in lending. Credit reports are a primary tool that lenders will use to make decisions on how much they are willing to give you as well as the rate of interest. The information your credit report contains has a significant impact on your future in so many ways.

Given the fact that your credit report is so important, keeping tabs on it makes sense. There are a lot of companies out there that will allow you to view your credit report; but, before you dive in and start looking, it’s important to know the best way to obtain this invaluable information.

Avoid Credit Report Memberships

You’ve probably seen plenty of commercials for companies that offer credit reports. These ads usually paint a pretty grim picture. For example, they may show someone who is stuck living in his parent’s basement because he has horrendous credit. While they are right about checking your credit report regularly, their offer for a “free” credit report may not really be free.

Read the fine print. There’s usually a trial period involved. You will have access to your free credit report for a certain time frame (30 days, for example,) but if you don’t cancel before the trial period ends, you will be charged a monthly fee. In other words, you’ll end up paying to keep track of your credit, and unless you want to add another bill to your expenses, you want to avoid signing on.

Your Best Bet

You can get your credit report without paying a monthly fee. Equifax, Experian, and TransUnion are all providers that issue a free yearly credit report. Unlike credit report companies that advertise on TV, there is no fine print. They all offer accurate information regarding your current credit standing and history that will let you know where you stand financially.

Credit Report Inquiries

You may have heard that accessing your credit report harms your credit. However, this is not entirely true; there are two different types of inquiries on your credit report: soft inquiries and hard inquiries. Soft inquiries do not affect your credit report, but hard inquiries from a creditor do. So what constitutes as a hard inquiry?

Hard inquiries are made by creditors when you apply for a credit card, loan or mortgage. Typically you have to authorize a hard inquiry, so you won’t have to worry about being caught off guard. As a result, a hard inquiry may lower your credit score by a few points. Generally, a hard inquiry may stay on your credit report for two years.

There is no denying that your credit score is the most vital component of your financial portfolio and keeping track of it holds a lot of value. However, it’s important to know the best way to monitor your credit activity so that it doesn’t end up harming you.

Is your credit report a high level of importance to you? What are some other ways credit reports can help you? Feel free to leave your comments below!

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