Credit checks allow consumers to know what debts, transactions and other information is a part of their credit history. From a business standpoint, a person will want to know their credit score due to the fact that it is a vital instrument used to obtain a loan.
Who Uses Credit Scores?
Before getting your free credit check, it is important to know who uses this information in the first place. Financial institutions are the ones that will use your credit history to determine how responsible you are. The essence of this is that the lenders want to be able to determine their overall risk when they provide a loan of any type.
If a person has abysmal credit, they will either be ineligible for a loan or mortgage, or they will have to pay hefty interest rates. This is definitely not something a person wants when they are living paycheck to paycheck. Instead, a high credit score may mean a person pays less in interest and is able to obtain loans quickly.
There are many employers that are also inquiring about a person’s credit history. In fact, over 60 percent of companies now require a person’s credit report prior to job acceptance.
Steps to Obtain Your Credit Score
Now that we know who uses our credit, it is time to dig deeper and see what our credit check reveals. This means that we need to be able to request a free credit check. By law, every citizen is eligible for a free report every year. This is done for each of the 3 credit bureaus and can be spread out if a person wishes.
The first place to visit to receive this report is annualcreditreport.com. This is a government sponsored method of getting a free report and it is the most reliable. Others may offer this, but be wary of sending your information to just anyone.
Once on the site, you will be able to request your annual report. This will be done by asking for your:
- Date of Birth
- Social Security Number
Other information may be required, but this is the information that truly tells the bureau who is requesting information.
Now, you can choose the bureau that you want to request a credit check from. This is vital to your success. If you need a full report because you want to know your credit before going to apply for a loan, request a report from all of the respective bureaus at one time.
If, however, you want to check your report for security reasons, you can also choose to receive a report from just one bureau at a time. This allows you to request a report throughout the year from each of the 3 bureaus. This works out to checking your credit once every four months.
Once all of this has been filled out, you will be able to view the entirety of your report right online. Furthermore, you will be able to print the report for your records.
It is important to know that before a report is given, there will be some very personal questions asked. These questions are used to ensure that the person requesting the report is actually the person it belongs to. Some of the questions may even be difficult for you to answer. School names, addresses and phone numbers from your childhood may be included.
Before filling out a request, ensure that you gather all of your information first. This allows you to request your report without any hassles along the way.
There are a massive amount of sources wherein your credit can be checked. These include:
Any of these services will be able to assist you with checking your credit. CreditKarma is especially nice because they offer this completely free of charge every month and also provide a very intuitive dashboard to track your credit.
Understanding Your Credit Check
Once you receive your report, you will be presented with an overall score, dubbed your credit score, as well as an in-depth history of transactions. While this may be overwhelming at first, it is essential to be able to fully understand what it is you are looking at.
- Payment History: The payment history section will comprise of 35 percent of your overall score. This is payments that have been made, missed or that are delinquent. Within this field, you will have a snapshot of all the payments made to creditors. If you make your payments on time, you will raise your overall score. Those that fail to make payments will have their score reduced.
- Amount Owed: This is perhaps the most confusing portion of a report. This will indicate your debt-to-credit ratio. In essence, this is how much total available credit and debt you hold. If this number is too high, it will lower your credit score. Adversely, if you have too much open credit, this will also lower your score. Since this accounts for 30 percent of your overall score, you want to maintain a good debt-to-credit ratio.
- Length of Credit: The length in which you have had credit. The longer amount of time a person has credit and has ensured they pay their debts, the better their score will be. This is 15 percent of a person’s score.
- Accounts and Inquiries: This indicates what accounts a person has just opened as well as any inquires made. It is a bad idea to apply for every credit card available as this will lower your credit score and may be a financial red flag on your history. This is equal to 10 percent of your score.
- Types of Credit: The final portion of your report will indicate all of your credit accounts. This means credit cards, loans, mortgages and any other open accounts you may have.
Once a free credit check has been made, you can work on correcting errors on your report or raising your score. This can be done by paying your bills on time and reducing your overall debt by paying off your balances faster.
Before obtaining a loan of any kind, it is highly advised to pull your report to ensure nothing is amiss. Knowing that you have a high score means that you will receive lower interest rates and have a much easier time obtaining any form of credit.