The Benefits of Getting Your Free Credit Report

Date March 12, 2014

Ads offering free credit reports are almost inescapable on television and in other media. But what exactly are credit reports and why should you care about reviewing your file? Familiarizing yourself with your credit report has a number of important, far-reaching benefits.

Why Get a Free Credit Report?

A credit report is a detailed analysis of your current and past credit obligations as they appear on file with each of the nation’s three credit bureaus. The information in each report reflects your overall creditworthiness.

You may be wondering why you should bother to read your credit reports, especially if you always pay your bills on time. A Federal Trade Commission study released in February 2013 revealed that 5% of customers found errors in their credit report that could result in them being charged more for products such as personal and business loans, and insurance. Also, in some states, companies are permitted to conduct pre-employment credit checks on job applicants. So it’s vital that you know what’s in your report.

Reviewing your free credit reports every year allows you to correct any errors you find as well as make payments to clear any legitimate blemishes on your record. Good credit could mean the difference of over a point in mortgage interest rates, which translates to the difference of tens of thousands of dollars in buying power on a home or a savings of hundreds of dollars monthly in your payments.

Solid Credit for a Great Life

Excellent credit makes a huge difference in more areas than most people realize. Examining your credit report and improving your credit will help you qualify for the best when it comes to:

  • Credit Cards: Better credit means a higher credit limit, a lower interest rate and access to cards with the best rewards and perks.
  • Insurance: Insurers actually offer lower premiums to customers with good credit.
  • Car Purchase: Get a lower interest rate and the power to buy a nicer car.
  • Home Ownership: Get lower rates for mortgage and refinancing, as well as lower closing costs and fees.
  • Apartment Rental: Landlords run credit checks. You’ll only be approved as a renter if your credit passes muster.
  • Employment: Many prospective employers do credit checks to learn about applicants’ payment history. Landing that dream job often requires a credit history as impressive as your resume.

Understanding Credit Reports

Your credit report is a comprehensive collection of information about how you handle all kinds of debt. Three major credit bureaus compile credit reports in the U.S.: Equifax, Experian and TransUnion. Any companies you exchange financial transactions with may send information about you to one or more of these credit bureaus. This information is often updated monthly, although some companies only report severe delinquencies.

All credit reports contain a core of basic information, including:

  • Identifying Data: This includes your name, address, birth date, Social Security number and possibly your employer. This information is for identification purposes only and doesn’t affect your credit score.
  • Credit Accounts: Lenders inform credit bureaus about the type of account established (mortgage, credit card, auto loan, etc.), the loan amount or credit limit, the date the account was opened, and your payment history.
  • Collection and Public Record Items: Any delinquencies reported to courts or collection agencies, including liens, bankruptcies, suits, wage garnishments, foreclosures and other judgments are reported to the credit bureaus.

Of equal importance is what information never appears in your credit report. These reports won’t reveal your:

  • Religion
  • Gender
  • Income
  • Ethnicity, race or national origin
  • Personal lifestyle, preferences or friends
  • Political affiliation
  • Checking or savings account information

Credit Reports are Free!

You should never have to pay for a credit report. In fact, the Fair and Accurate Credit Transactions Act (FACT Act) of December 2003 gives consumers the right to one free comprehensive credit report from each of the three national credit bureaus once annually, through a central source. Take advantage of the law and get your free credit reports each year by visiting www.AnnualCreditReport.com or calling 877-FACTACT.

Ordering your free credit report puts you on the road to a bright future with all the best financial opportunities the world has to offer. You’ll enjoy the peace of mind of knowing your credit is stellar or gain the tools and information to clear up any problems. Keep in mind that credit reports do not generally contain actual credit scores, and most companies offering free credit scores are not really free in the long run. You can get your scores directly from the three credit bureaus for a small fee.

Your credit score—also known as a FICO score—is a 3-digit number that summarizes your creditworthiness. It ranges from 300 (worst) to 850 (best).

If you wish to see your credit score for free, you may be able to obtain this information though your lender, credit card provider or MCCU’s ID Secure service.

 

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