Tuesday, August 25, 2009

Three handy little credit lessons, in plain English

Until this post I never bothered checking my credit report or credit score. Can we say, “denial”? But now that I’m on the road to mending both, I actually want to keep tabs on them.

So when I met with Carmen, my debt diet doctor, last week, I asked her for some pointers—because you know nothing is ever clear-cut (especially for me!) when money’s concerned. Here’s what she had to say:


1. You can get your credit report—for free—once a year.
I told you that way back in this post, where I also told you the only place to get your free credit report was from annualcreditreport.com. This is still the only site where you can get honest-to-goodness for-free reports from all three nationwide consumer credit reporting companies (Equifax, Experian, and TransUnion) without signing up for some “credit monitoring” nonsense or an auto-refill membership to a baby-animal-of-the-month DVD club.

See our tips: What the Newly Passed Credit Card Act Means for You (In Plain English)!

2. You should pay to get your credit score at least once a year.
This I screwed up—surprise! When I got my credit score in the aforementioned post (634—yikes!) I just paid extra and had one of the credit reporting companies give it to me. The problem is, every company tallies your score differently, and anyone can give you a credit score based on their system. There are tons of “credit companies” on Facebook that will give you a credit score. Heck, my dog can give you a credit score (if you speak Chihuahua). However, the only score that actually matters is your FICO score. See, when you go to take out a loan or open a credit card, the lenders will check your FICO score. Since this is the only one that other people check, this is the one that counts. Make sense?

To get your FICO score, visit myfico.com. It’ll set you back $15.95, or you can sign up for a 30-day free trial of Score Watch and get it for free. (Just remember to cancel Score Watch after 30 days or they’ll bill you $90—they do send you an e-mail reminder before they bill you, which is nice.)

So my brand-spanking new FICO score is 642, which is still pretty lame, but it’s up from my old score (woo hoo!). I just wish I knew how the two scores measured up. Sigh.

3. Running your credit report or checking your score more than once a year isn’t all that bad.
I was under the impression that doing either more than once a year could bang up both—and it’s true. That said, Carmen recommends checking both more than once a year while you’re still building them. The damage will be way minor—and it’s better than letting mistakes or bad debt linger for 12 months or longer.

When you’re a year away from taking out a major loan (for, say, buying a home), make sure everything’s on the up-and-up, then don’t check anything for 12 months. Also don’t open new credit cards (or close old accounts) in that time frame.

So that’s the wisdom I have to pass on for today. Did you all already know all of this, or did I help someone out there? Have you guys checked your credit report or score lately? Anyone wanna

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