Learn About Free Credit Reports: The First Step to Improving Your Credit

Obtaining a free credit report is the first step of increasing your credit rating. Knowing your scores will help you understand which credit lines are lowering your score, the total amount of debt you owe and how much you need to improve your score in order to receive a loan or a new credit card. It will also increase your chances of detecting identity theft. 

Fortunately, you are entitled to a free annual credit report from each of the main credit reporting agencies. A report will give a full account of your credit history, existing lines of credit, open loans, whether you have filed for bankruptcy in the past and more. 

Note that a full credit report is different from a credit score. To have a full understanding of your credit rating, it is important to request a free copy of your report every year and to regularly monitor your score. 

What are the three credit reporting agencies?

The three credit reporting agencies in the U.S. are Equifax, Experian and TransUnion. Each company collects information about you and your credit, including your mortgage, loans, open credit cards and other forms of debt.

Each company uses its own formula to calculate your score and create your report, which means that your score may vary slightly between each bureau. 

It is important to check your credit report from all three reporting agencies, because you may not know which score a lender will check. A lender may also check your report with all three bureaus. 

If you have learned how to increase your credit score and have taken steps toward improving it, you may want to obtain separate copies of your report from each agency. This way, you may spread out your reports throughout the year to see how your score improves. 

Otherwise, you may request a report from all three reporting agencies at the same time.

Learn About Options for Monitoring Your Credit Score

While you are learning how to increase your credit score, free credit score websites are an excellent tool. Using a credit score site will allow you to frequently monitor your score and quickly catch dips or increases. 

Depending on the site you use, there is no limit to the number of times you may check your score each year. Checking your own score is also considered a soft inquiry, and will not lower your points.

Below are some of the top-rated monitoring sites to use while you are improving your credit score:

  • Credit Karma. This is an entirely free service that will display your TransUnion and Experian credit scores. The Credit Karma sign up process is simple and relatively quick and does not require you to enter a credit card number. As TransUnion and Credit Karma are owned by the same company, you may dispute your TransUnion report through the Credit Karma app or directly through the website. 
  • WalletHub. This is another free credit score service that allows you to view your full TransUnion credit report. You may check your score through WalletHub’s free credit score app or its main website. As with Credit Karma and Credit Sesame, no credit card is required for sign up. You may also elect to receive daily updates and text message alerts. 
  • NerdWallet. The NerdWallet credit score feature is a free service that allows you to check your VantageScore 3.0. A VantageScore is a credit score developed by the three major credit reporting agencies. It is used to determine how likely you are to repay your debt. This score is updated on NerdWallet every seven days. 
  • Credit Sesame. This site allows you to view your credit score through Equifax for free. The overall Credit Sesame review is extremely positive, as you do not need to enter a credit card number to sign up. You may also sign up for live updates and alert emails on your score. Like Credit Karma, this service will give you personalized credit card offers. 

What is an annual credit report and how do you use it?

Wondering how to get a free credit report? You are allowed to request a free report every year by law. AnnualCreditReport.com is the only site authorized by the federal government that provides free copies of your report. 

You are entitled to one free report from each reporting agency every 12 months. You may be able to obtain another report in this time frame if you have recently been denied approval for a loan, mortgage or credit card. If this is the case, be sure to make your request within 60 days of the denial. Otherwise, you may be required to pay a fee.

The annual credit report request form is located on the website. When filling out the form, you must submit your full name, address, Social Security Number (SSN) and date of birth. You may also be asked about your loans, mortgage payments and open credit cards as a way of verifying your identity. 

If you want additional reports within 12 months, you may contact Equifax, Experian and TransUnion separately to buy copies. Note that you will be charged for more than one report request every 12 months.

You may also use the Annual Credit Report site to prevent identity theft and learn how to report identity fraud. The site provides tips for monitoring your report, detecting fraud and what to do if your identity has been stolen. The sooner you catch identity theft, the sooner the issue may be resolved.

How to Improve Your Score

If you want to increase your credit score, it is important to monitor your score and prevent it from decreasing. One of the first steps is to stop increasing your debt. Try not to use your credit cards as much as possible. If you have a steady paycheck, make sure a certain percentage of your monthly income goes toward your debt. 

If you want to know how to pay off debt, it is important to understand how your score is calculated and which variables will increase or decrease your points. The following factors will impact your score:

  1. Payment history
  2. How much debt you owe
  3. How much credit you have available
  4. The length of your credit history
  5. How many accounts you have open
  6. The types of debt you owe (mortgage, loans, etc.)

If you improve your credit history and lower the amount of debt you owe, you will begin to see your score increase.