Improve Your Credit Rating
Securing Your Financial Future
Whether it's for a car loan, a new credit card, or a mortgage, sooner or later you're going to apply for credit -- and that's why you need to take charge of your credit rating now. Thanks to the new Fair and Accurate Credit Transactions (FACT) Act, you are entitled to one free credit report a year from each of the three major credit bureaus (which you must obtain from a joint source the agencies have set up). But it's up to you to monitor your rating -- and your behavior -- to make sure your score is up to par. That minimal effort will pay off in significantly lower interest rates, decreased damage from identity theft and, since nowadays potential employers may check applicants' credit ratings, maybe even better job opportunities.
Your credit report is simply a listing of how much credit you currently have available, how much debt you have, and how well you've met your payment obligations in the past, but it's the key to your standing with potential lenders. Managing your credit involves scrutinizing your reports regularly for errors, reviewing them for signs of outside tampering, and working to improve areas where your borrowing record is less than stellar. "The most important thing you can do to boost your credit rating is to learn your score," says Michael Bridges, director of marketing and operations for MyFICO.com, a Minneapolis-based credit-scoring company. "If it's great, maintain it. If it's bad, fix it. It will mean more money in your pocket."How to Get Free Credit Reports
Since the FACT Act went into effect, in 2005, the source for free credit reports is www.AnnualCreditReport.com (877-322-8228). This is a centralized service created jointly by the three leading credit bureaus: Equifax (800-685-1111; www.equifax.com), Trans-Union (800-916-8800; www.transunion.com) and Experian (888-397-3742; www.experian.com). You can order reports from the individual credit agencies, too, but then you'll have to pay for the information. Prices vary but generally run around $10 per report. Two exceptions: If you've been turned down for credit in the past 30 days, or if you believe that you have been a victim of fraud, you are entitled to free reports from each of the bureaus.
It's important to keep an eye on all three reports since they may not contain identical information -- especially if inaccuracies have crept in -- and you don't know which company a potential lender will contact to get your record. But before ordering your reports, consider your strategy. You can order all three at once or you can spread them out throughout the year, for example, requesting one from a different company every four months. Distributing your requests gives you the best sense of your credit standing on an ongoing basis, allows you to react quickly to signs of identity theft and lets you see how your actions have affected your credit. But ordering all three of your credit reports at once gives you a good sense of your credit standing at a given moment in time and is especially helpful if you're on the verge of applying for a significant loan and need to assess your chances.