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Checking your credit history and credit scores can help you better understand your current credit position
Regularly checking your credit reports can help you be more aware of what lenders may see
Checking your credit reports can also help you detect any inaccurate or incomplete information
Your credit history and credit scores are vital pieces of information that are important to your overall financial wellbeing. Viewing your credit history – as shown on your credit reports – and your credit scores may help you understand your current credit position.
Generally speaking, a credit score is a three-digit number designed to represent your credit risk (the likelihood you’ll pay your bills on time). Your credit history is the record of how you have managed your credit accounts. It may include your current and past credit accounts, information on your payment history and the total amount you owe. Credit scores are calculated using information from your credit reports, although credit scoring models are different.
Along with many other pieces of information, potential lenders and creditors – including credit card companies, mortgage lenders and auto lenders – may use your credit scores and credit history to help make lending decisions. These companies want to know how likely you are to pay the money they lend back as agreed.
Because of this, it’s important to regularly check both your credit scores and your credit reports. Your credit scores and credit history are among the factors that may determine your loan terms, including interest rate, and it’s important to ensure the information on your credit reports is accurate and complete.
Contrary to popular belief, credit scores are not part of your credit reports, although credit scores are calculated from data on your credit reports and may be delivered along with it. You also may not know that you may have more than one credit score -- each credit bureau or company that provides credit scores calculates them using different credit scoring models. Because of this, your credit scores may vary. Another reason your score may vary is that the underlying credit data may be different since not all lenders report to all three nationwide credit bureaus. Some report to only two, one, or none at all.
It's a good idea to check your credit reports at least once a year. Follow our checklist to review your Equifax credit report.
You’re entitled to a free copy of your credit report from each of the three nationwide credit bureaus every 12 months through www.annualcreditreport.com. Familiarizing yourself with the information on your credit reports may help you decide whether to apply for credit or wait a while before applying.
Additionally, regularly checking your credit report can allow you to:
Identify inaccurate or incomplete information
You’ll want to ensure your personal and credit account information is accurate and complete, and there are no unfamiliar accounts listed. If you do see something you believe may be inaccurate or incomplete, contact the company reporting the information. You can also dispute the information with the credit bureau furnishing the report.
If you see information on your credit report from one of the three nationwide credit bureaus that you believe may be the result of fraud, contact the company reporting the information and let them know there may be fraudulent activity. You may also want to check copies of your credit reports from the other two credit bureaus to see if the same information is reported there.
One note on hard inquiries – lenders and creditors sometimes use third parties to pull credit reports in response to a credit application, so the inquiry company name may not be immediately familiar and may not be the same as the lender. If you see a name that isn’t familiar, but you have recently applied for credit, you can check with the lender to see if a third party was used to pull your credit reports. Learn more about steps you can take if you believe information on your credit reports may be the result of fraud.
Know what lenders may see
If you’re planning to apply for credit, including making a large purchase like a house or a vehicle, preparation is important. Checking your credit reports can give you an idea of what lenders may see when you apply for credit. It may also be helpful to understand hard inquiries and how they work, particularly when you’re making a large purchase.
Ensure accounts are reported properly
When you check your credit reports, you’ll want to make sure your lenders and creditors are accurately and completely reporting your payment history. You’ll also want to ensure that any old information that may be considered “negative,” such as late payments or bankruptcies, has been removed from your credit report after the appropriate amount of time has passed.
Whether you are preparing to buy a home, a new vehicle, or just staying up to date on your finances, taking the time to check your credit reports and credit scores can help prepare you to take the next step.