How's Your Credit Health? Time for a free Credit Checkup!

New law mandates free yearly access to credit reports

Having a “credit checkup” is important to achieving financial security now and in later life. We all know how important it is to have physical checkups, but have you had a “credit checkup” lately?

Like a medical checkup, a credit checkup will help you identify whether you are credit healthy or if you need to take action. Many credit “illnesses” lie hidden until they surface as a crisis in obtaining a loan or making a purchase requiring credit approval. They can create very serious emotional and financial problems for you or your family, especially in the case of identity theft. Unfortunately, very few people ever think of having a “credit health checkup.”

Your ability to get credit is determined by the information stored in credit files maintained by credit bureaus. The information in your file is used to produce credit reports, and to calculate your credit score. Your credit report may also influence whether you get a job or insurance, as employers and insurance companies may base their hiring decision or underwriting on information contained in your credit file.

Individuals with higher credit scores have a better chance of getting a loan and borrowing money is likely to cost less.

The credit files themselves may contain mistakes, resulting in problems even for people who always pay their bills on time and repay their debts according to the terms of the loan.

It’s important to find out what others see when they request your credit report. A review of your credit file can expose any hidden problems and allow you to correct them before they erupt into a crisis. Also, checking your credit report regularly can provide early indications of identity theft or unauthorized use of credit in your name.

Free annual credit report
Just as a physical check-up helps to uncover health problems, a Credit Check-Up will give you a chance to check your credit health. In New Hampshire, consumers now have the right to receive a free annual copy of their credit report from each of the three credit bureaus—TransUnion, Experian and Equifax. Monitoring your credit report will help you maintain your credit-worthiness and protect you from inaccurate information and even identity theft. Reviewing your file can help you take steps to improve and “clean up” your credit rating.

To review your credit reports throughout the year at no cost, request a free credit report now from one of the credit bureaus; then, every four months request from a different credit bureau. By the end of one year, you will have a free credit report from each of the three credit bureaus.

In addition to your free annual credit report from each of the three credit bureaus, you can pay $9.50 to receive a copy of your credit report at any time. Also, any time you are denied credit, you are entitled to a free copy of your credit report from the credit reporting bureau that provided the information to the prospective lender. Your denial letter should contain information on how to request that report.

How to get your free credit report
The three credit reporting bureaus have collaborated on a central web site consumers can use to access their credit reports online.

As of September 1, those of us on the Eastern Seaboard can use the Web site to make our requests.

If you choose to request your credit report online, go through https://www.annualcreditreport.com. Look for the heading https at the beginning of your URL. The ‘s’ indicates the Web site is secure. Copycat Web sites may make it easier for the Web site to gain access to your computer information through spyware or adware.

Each of the credit bureaus requests additional information as an extra proof of identity for security purposes, to make sure that the online user is the same person named on the credit report. The credit bureau may ask for lender names, monthly payment ranges for a specific lender, the name of your employer, or account numbers of specified accounts (such as credit cards, mortgages, or consumer loans).

Two alternative ways to get access to your free credit report if you’re not comfortable getting your credit report online are:

• Call the toll free number 1-877-322-8228
• Submit your request by mail to Annual Credit Report Request Service, PO Box 105281, Atlanta GA, 30398-5281. You can download a form from the central web site.

Credit scores
Lenders primarily use credit applications and the information in your credit report to determine the financial risk of lending you money. Credit scoring was developed to simplify and speed up the lending process by calculating a number to represent a person’s credit risk level.

Your credit scores is a snapshot of your creditworthiness, based solely on the information in your credit report maintained by that credit bureau. Credit scores range from 150 to 900. The higher the score, the more confidence a lender has that the debt will be repaid. The lower the score, the more it will cost you in interest and fees to get credit.

You don’t receive your credit score as part of your free credit report. You’ll have to order it separately, and you’ll have to pay a fee to get it.

Avoid the pitfalls when requesting your credit report
Be forewarned: Many other Web sites have cropped up that promise free credit reports; if you get into one of these sites, you may end up paying for a credit report that could have been free, or purchasing expensive goods and services, such as credit card theft protection, credit repair, etc.

Credit Check-Up workshop
UNH Cooperative Extension is now offering a one-hour workshop called Credit Check-Up to help you learn how to understand the information you receive in your credit report. This free workshop is available to the general public, to organizations, or as a worksite program for employers.

Did you know….?

• Three-fourths of American families have one or more credit cards.
• The average total credit card debt for American households with at least one card was $9,000 in 2004.
• In 1999 that figure was $7,564 showing credit card use increasing.
• A 2004 Gallup Poll shows that more than half of Americans have at least one card they don’t pay off in full each month. The average outstanding balance per card with balances is reported to be a little over $2,900 (in the Northeast the average balance is $1,918).
• Employers and insurance companies are among the businesses that can access your credit file.
• You have a right to receive a free annual copy of your credit report from each of the three credit bureaus.
• Your credit report says a lot about who you are to potential lenders. Know what others know about you by obtaining a copy of your credit report.
• Errors are often found in credit reports. This is a key reason for you to periodically review your credit report.
• Another important reason to regularly check your credit report is for early detection of identity theft.
• Your credit report is the basis of your credit score.
• Your credit score will determine whether you are approved for a loan and whether you pay a higher interest rate for a loan.
• When requesting the free annual credit report, consumers need to be aware of signing up for unwanted services with a cost from the three credit reporting agencies.
• You can write a 100-word statement to explain negative information in your credit file, but be aware that lenders often only look at your credit score, and this explanation is not included in the score calculations.
• You can follow some simple steps to “clean up” your credit file.
• Monitoring and periodically reviewing your credit report is an important step toward protecting both your identity and your creditworthiness.

By Suzann Enzian Knight, Extension Family Resource Management Specialist; Kathe Fredette, Family & Consumer Resources Program Assistant, Nancy Bradford-Sisson, Sharon Cowen and Deb Maes, Family & Consumer Resources Educators