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SPOTLIGHT

Credit reports: What they are and how to get one


Rising degrees of education

We’ve all seen the ads: A shaggy-haired young man sings in front of a band about the pitfalls of poor credit, the demeaning jobs he has to work, the lousy digs he lives in, all because of his poor credit rating. He urges listeners to get a free credit report at a particular website, but is that really possible?

First, let’s talk about what a credit rating is, and how it relates to your credit history. When you apply for a credit card, a loan to buy a car, or even a cell phone, the company you apply with will review your credit report.

A credit report is basically like your financial report card. It lists your bill payment and loan repayment history, the amount of credit you have available, your monthly debts, late bill payments, and other types of information that can help a lender determine whether you are a good or bad credit risk.

Unlike the rumors you may have heard at school about your “permanent record,” your credit history follows you wherever you go. That’s why it’s important to pay your bills on time, make your loan payments, and avoid going deeper into debt than you can manage.

You should also be aware of the difference between a credit report and a credit score — a number indicating the amount of credit risk a person represents. The score is based on a formula and determined by your credit history. Like a grade point average, it’s a quick way to see how high you rank compared to others. The higher the score, the more likely banks and other companies will be to lend you money for a car or other big purchase, and the better interest rate you’re likely to get.

How to (really) get your credit report for free

So how can you see your report, and avoid paying for it? By law, credit bureaus — the companies that keep track of everyone’s credit histories — are required to provide everyone with a free copy of their credit report each year. To get your free credit report, follow these steps:
  • To request a free credit report, always start here: www.annualcreditreport.com. This site is run jointly by the three credit bureaus — Equifax, Experian, and TransUnion. Going through any other site or advertisement will cost you money.
  • While you can obtain your credit report for free, you still have to pay to learn your credit score.
  • You should be on the alert for bogus offers of a free credit report. Any unsolicited message about a free credit report is most likely an attempt at fraud.
  • Finally, you should notify the credit bureaus of any error you find in their reports. Doing so may take some time, but it’s vital to the protection of your credit profile.