Credit reports can now be obtained for free!
Consumers do not have to pay a fee to obtain their credit report. Each of the nationwide consumer credit reporting companies is required to provide a free credit report, upon request, once every 12 months. Remember this is a free service—don't be fooled by an unsolicited email or advertisement that tries to charge a fee for a credit report. Visit AnnualCreditReport.com.
Why review a credit report?
Monitoring your credit report is important because so many decisions are now based on how you manage your finances To make sure that credit scores are based on accurate information, you should consider reviewing your credit report from each of the three major consumer credit reporting bureaus each year.
Also, checking your credit report is one of the most effective ways to protect yourself against identity theft. All U.S. residents may monitor their credit report for errors and unauthorized use by ordering one free copy of their credit report each year from each of the three national credit reporting bureaus: Equifax, Experian, and TransUnion, at AnnualCreditReport.com.
If you find errors on your credit report, contact the credit reporting agency. They are required to investigate and respond to you within 30 days of your notification to them.
What is the difference between a credit report and a credit score?
A credit report contains information on residence, how bills are paid, and whether there have been any legal actions such as arrests or bankruptcy filings. Credit information is often reported by banks, credit card companies, collection agencies, or a court clerk. That information is reported to consumer credit companies Equifax, Experian, and Trans Union.
A credit score is a number based on a consumer's credit history and current credit worthiness. The number is the product of a formula developed by a consumer credit reporting firm or other company. Credit reporting companies legitimately sell the information in your credit report to creditors, insurers, employers, and other businesses. These organizations/businesses use your information to evaluate your applications for credit, insurance, employment, or a mortgage.
How is a credit score used?
Credit scores are not only used to make lending decisions, but also to predict the likelihood that someone might file an insurance claim. Many insurance companies use credit scores, in part, to determine the level of policyholder risk and to set premium rates or decide whether to issue a policy. Some employers will check your credit score before they hire you and landlords use this information when deciding to rent property.
Credit scores are affected by bill paying history, number and type of open accounts, outstanding debt, late payments, collection actions, and other credit experience.
Ways to Improve your Credit Score
- Pay your bills on time—late payments negatively impact your credit score
- Limit the number of new accounts you open--opening new accounts does not necessarily improve your credit score
- Length of credit history- keep accounts you’ve held the longest open & active—use at least every 6 months
- Pay down debt and keep balances low. Part of your credit score is based on the amount of outstanding debt
- Check your credit report by requesting your free credit report and report errors
Paying off Debt
- There are several things that you can do to help pay off debt:
- Assess the problem--determine why you have a problem, develop a budget by tracking your spending and set a goal
- Put your extra income into paying off debt, call creditors of the debt you are having difficulty paying and develop a new repayment plan
- Use a tool such as PowerPay to help you develop a self-directed debt elimination plan Powerpay.org.
If your debt becomes overwhelming, there are many resources to help. In Minnesota, the Department of Commerce regulates two types of firms offering credit repair services: credit service organizations and debt management companies. These firms must offer you a contract describing their fees and services, and they must register with the Department of Commerce. Before signing a contract with any firm, always check to see that they are licensed by visiting the License Lookup on the Commerce website.
Check to see if the firm is a member of a major association, such as the National Foundation for Credit Counseling or the Association of Independent Credit Counseling Agencies where the members are nonprofit agencies using certified financial counselors that meet certain quality and ethical standards using certified financial counselors.
What to Consider Before Choosing a Credit Repair Firm
- Avoid offers of a quick debt reduction or debt settlement plan with high up-front fees.
- Beware that some fraudulent agencies will get away with using a non-profit status just to collect your money. Legitimate agencies should be willing to sit down with you and discuss your spending habits and help you come up with a budget.
- Beware of unrealistic promises, such as erasing your debt for pennies on the dollar in a short in a short time span or promises to reverse a bad credit score.
- Work with a Minnesota licensee that has a local office with staff available to answer your questions
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