Getting your annual credit report can be very useful for your personal finances. Lenders examine your credit score and credit report to determine your reliability as a borrower. However, your credit report can be used to better your credit. Your credit report has comprehensive information on your payment history, credit accounts and your personal information.
You check credit score to see the overall health of your credit, but your credit report can show you more details that is not available by looking at your credit score. Missed payments and credit inquiries are tracked by your credit report but also heavily influence your credit score. Learning how your free credit check can work for you when you need it to.
How to Check Your Payment History to Better your Credit Score
Analyzing your free credit report can serve as a reminder of what you have been paying over a long period of time. Your payment history will determine about 35 percent of your FICO score. For this reason, keeping track of your payment history can help you get a better score the next time you check your credit score.
The payment history on your credit report will show you a two-year record of the statuses of your accounts. Any payments that you have missed will be on your record for at least seven years. Alongside missed payments, it will also show the amount that was owed and how late the payment was. Lenders, banks, and other financial institutions will mainly check how punctual your payments are and examine your spending habits.
How to Track Your Credit Inquiries
When you do your free credit check, you can also look at your credit inquiries. Credit inquiries are requests made by legitimate businesses to check your credit. There are two ways to classify credit inquiries: hard inquiries and soft inquiries.
About Soft Inquiries
Soft inquiries occur when your credit is being reviewed by a prospective lender as a background check. When you are learning how to check credit score and credit report, you will find that your own inquiries are included as soft inquiries. Credit checks made by businesses to offer you services and other businesses you have a credit account with.
About Hard Inquiries
Hard inquiries are when a prospective lender is reviewing your credit because you applied for credit with them. These credit checks can occur when applying for an auto loan, home loans or credit card. Each of these credit checks are known as single hard inquiry. It is important to note that each hard inquiry on your credit will result in some points taken off your credit score.
The amount of points removed from your credit score will depend on how much credit you borrow, whether if you are taking out a new loan as well as other factors. When you are receiving your credit score, whether it is a FICO credit score or VantageScore, credit reporting agencies will set their standards for scoring, thus the amount of points removed will vary.
Additionally, remember that you are allowed by law to know who inquired about your credit. If there are unknown names your credit report, speak with the credit reporting agency to ask about for that information.
How to Dispute Errors on Credit Reports
A government survey has shown that over 20 percent of consumers have found at least one error on their credit report. If you decide to check credit score free and find a strange shift in your credit score, your credit report may provide more detailed answers as to why your score is the way it is.
A good time to check your credit report and correct any errors are when you are about to take a loan. Your lender will use the information on your credit report and your credit score to determine your interest rate. Examining your annual credit report before the loan can help you avoid getting higher interest rates on your loan.
How Free Credit Checks Can Prevent Identity Theft
Identity theft continues to affect millions of Americans every year. Javelin Strategy and Research states that 16.7 million Americans were victims of identity theft in 2017. Moreover, 5.5 million Americans were victims of credit card fraud and two million Americans were victims of bank fraud. A free credit report can provide initial fraud alerts to prevent further identity theft. The alert will expire after one year and you can place another alert on your credit report after the first one is removed.
It is also possible to freeze or unfreeze your credit report under all three credit bureaus for free. These security freezes, also known as credit freezes, can prevent new lenders from looking at your credit report. Checking your credit score on a consistent basis can alert you of any credit problems. Any strange drop in credit score is worth requesting one of the three annual credit reports.
Learn About Employment Credit Checks
Employment credit checks are typically done during the hiring process. One survey has reported that 95 percent of employers conducted some type of employment background check. The survey also showed that 31 percent of those employers performed credit checks on a few applicants while 16 percent would run them on all applicants.
Checking your credit score and looking at your free credit report can be useful before applying for a job. Employers who run credit checks typically do so for finance jobs, but this is not exclusive to this department. It is good to know that your credit health is good before proceeding with a job interview.
Credit Score vs. Credit Report
There are two pieces of information your lender uses in order to determine whether you will pay back your loan: your credit score and credit report. Your credit report carries detailed information like your payment history and credit inquiries but also your identity, existing credit information and public records.
Your existing credit information is distilled into what is known as your credit score. Your annual credit report will contain information on your lines of credit and payment history but will not contain your credit score. Most lenders will use the FICO credit score in order to determine the reliability of a borrower.