Is It Time To Check Your Credit Report?


Mark it on your calendar - it’s time to review your credit report—and you should make it an annual task. We all know that credit card companies and lenders rely on information that's in your credit report, so your credit score will determine your chances to borrow money. This is important keep in mind if you're thinking about purchasing a home in the near future.

Checking your credit score

Equifax (, Experian (, and TransUnion (, are the three major credit-reporting agencies. You can request a free yearly credit report—order one from each credit bureau to get a good idea of where your credit stands.

Credit scores can range from 200 to over 800. Scores below 620 are considered to be risky; 720 and above earn excellent rates and terms.


What determines a credit score:

1. Your payment history is typically 35% of your total score: Late payments and total amount of money owed are the two areas that are examined most closely.

2. Amount owed is usually 30% of the total score: Large, outstanding balances don’t automatically damage your score. The significant factor is the percentage of total available credit you’re using on your credit cards. Consolidating credit card balances onto one card actually causes your score to go down.

3. Length of credit history about 15% of the score: You need credit to get credit, so there’s no way to improve this part of your score other than good old fashioned time.

4. New credit is around 10% of the score: Applying for too much new credit in a short period of time is a common mistake. If you have a lot of credit requests, in a short period of time, on your credit—this will make your score.

5. Type of credit (10% of score): What is the overall mix of your credit—loans, mortgages, credit cards, etc. Scoring companies won’t disclose how accounts are weighted in determining your overall score.

How you can improve your credit score

Lenders receive your score and “reason codes” determined by the credit scoring companies. Make sure you research these reason codes. These codes are the keys to improving your overall score. When you get your report in the mail, you'll also want to review the following:

•  Check that all information on your report is correct. If it is not, immediately notify the credit bureau in writing of inaccuracies. Use certified mail to send them copies of documents that dispute the incorrect entries. The reporting companies have 30 days from receipt of your dispute to adjust or verify the data.

•  Someone else’s information might be attributed to you. You have an obligation to correct the information.

•  Look for inactive accounts. Close any accounts you don’t use.

•  Check for late payments. You can request that those older than seven years be removed.

•  Verify and update your accounts and account numbers.

•  Verify your social security number and address.