Checking your credit is not just reserved for financial institutions. In fact, you should be checking and monitoring your credit at minimum once a year to make sure the information publicly listed about you is accurate. Your credit profile is your record of financial responsibility. Companies that are considering giving you access to credit will need to check your record. They are only allowed to do so if you have provided consent by giving your social security number. Once a creditor has access to your credit file and extends you a credit line they are entitled to update your credit record by notifying the credit bureau of your track record over time. The credit bureau is the company that manages your personal file about your financial record. It is important to keep an eye on your credit report to make sure the most accurate information is reported.
Why Should I Monitor My Report?
Sometimes mistakes are made or there may be a dispute between you and a creditor and you should know when that happens so that you can fix it. Any bad information reported to your report will drop your credit score. A lower credit score will result in your paying more for credit lines or possibly being denied all together for a loan in the future. In the case of qualifying for a mortgage you will want your credit score to be as high as possible to qualify.
There are three credit bureaus, Experian, Transunion, and Equifax. By law you are entitled to one free printed report each year. This does require you to manually send a letter in the mail to each credit bureau that you want a file from. An easier and more frequent way to get a report is to pay an online service like MyFICO.com. The reason that I like MyFICO.com for pulling credit is they provide the ability for you to pull multiple versions of your FICO score for each bureau. MyFICO.com also provides a credit simulator that can project what possible changes to your credit file will do to your credit score. It is not 100% accurate but pretty close. When making corrections to your credit you may choose to get updated reports maybe every other month to verify creditors have updated your credit profile. In some credit challenge scenarios you may need to pull your credit as documentation of any mistakes or inaccuracies to catch creditors on a technicality. I will talk more about these credit repair techniques later on in this credit series.
Why Are There Multiple FICO Versions?
You may be thinking well why do I want to know about multiple versions of FICO? Well, not many people may be aware of this fact but there are different versions of the FICO scoring algorithm depending on what type of credit you are seeking. When applying for a car your FICO score version will be different than when applying for a mortgage. This is one of the great features of MyFICO.com. MyFICO.com provides all the different FICO score version. You will get a mortgage score, car loan score, etc. from one score report.
Pulling All Your FICO Scores
Go ahead and create an account on MyFICO.com. Once you have created your account you can decide to purchase all three reports or just one at a time. When applying for a mortgage the lender will always look at all three of your credit reports. The middle score between all reports is what will be used as your score for loan qualification. So if you don’t know all three of your scores I recommend pulling all three.
After paying for your credit reports all your FICO scores will be shown. Each score has a different scoring algorithm for different industries. Check any negative or incorrect items on your reports and make a note of it. You can dispute these items later which will improve your scores.
Simulate Impact From Possible Future Credit Decisions
One of the main reasons why MyFICO.com is great is the fact that they have a credit simulation tool. This tool helps you to identify what will happen if you make certain credit decisions. You can see how much your credit score could possibly increase if you pay off a certain amount of your credit card balance. This will let you know how much you need to pay down and approximately how much your score will change. Or you can see what would happen if you take out a new car loan, etc. Obviously this is just a simulation so actual results may vary but this will give you an approximation of what will happen.
MyFICO.com is the creator of the industry wide FICO scoring algorithm that so many creditors use so naturally they would be the best source for this information. Keep in mind when checking your credit this way on your own there is truly no negative impact on your credit score like when seeking credit from a creditor. Every time you get your credit pulled by a creditor your score gets an inquiry logged on the record and it can drop your score by about 5 points. So take ease that pulling your credit by yourself on MyFICO.com as many times as you need has no negative effect.