Beth Rumsey, Staff Writer

Bank interest rates are falling, and perhaps you are thinking about refinancing your mortgage loan. On almost every channel there are commercials about obtaining credit reports and knowing your credit score. But, what is a credit score? How would one obtain a credit report without applying for a loan? Why should I view my credit report regularly?

According to Chris Meyer, marketing/training officer at the Friendship State Bank, a credit report determines the rate of interest a person is charged and determines if a person qualifies for a loan. “It is a representation of a person’s credit worthiness,” said Meyer. A credit report shows the payment history and if payments were on time or late.

There are three credit reporting agencies: Experian, TransUnion, and Equifax. It is important to note that it is possible to obtain a different credit report from each agency. This is due to the fact that not all companies report to all agencies. A company may report to Experian and TransUnion, but not to Equifax for example. Also, a credit report is over a period of time, so there may be old loans that have been paid in full, but no new ones reported. Any discrepancies can be discussed with the lender, if it becomes an issue.

One’s credit report determines one’s credit score. Payment history, credit history, credit limit, and the type of loans such as credit cards or auto loans are all used in a mathematical formula to determine a score. This score then is used to lenders to determine credit worthiness and the amount of interest that is paid by the consumer. Scores can range between 300 to 850; and the higher the number the better. But be careful when inquiring about credit scores. According to Meyer, the more inquires about a credit score will actually lower it.

Federal law allows a consumer to receive one free credit report from each of the credit reporting agencies once a year. “The website, www.annualcreditreport.com is the only free credit report site authorized by the Federal Trade Commission (FTC),” stated Meyer. In order to obtain a credit report, one will need to fill in a request form for each of the companies. The reports can be viewed online, but sometimes, for security reasons, it will be necessary to have the company send a letter with a PIN number and a web address to access your report. If one doesn’t have access to a computer, then a consumer may write or call and request a report. The address and phone number are at the end of this article.

Once the credit report is received, review it and determine if it is correct. There may be old accounts that have been settled, but still on the report. It is possible that there is an account reported that doesn’t belong to you. The FTC recommends that you report any inaccuracies to the proper credit agency in writing. Explain why you are disputing the information. Include copies, not originals, of any documents that support your position as well as a copy of the report with the disputed items circled. If desired, mail the letter by certified mail with return receipt requested, to document when the credit reporting agency received the letter. Remember to keep a copy of the letter and all of the enclosures sent with it.
Credit reporting agencies are not required by law to provide consumers with a free credit score. A consumer should expect to pay for their credit score, and prices are different with each agency. A consumer who has applied for a loan can receive their credit score from the lender upon request. And, just like a credit report, a credit score may be different from each of the credit reporting agencies. If a credit score is low, it is possible to build it up by paying bills on time, limiting the number of credit cards used, and paying off loans. Consumers need to remember that the credit report can stay about the same from year to year, but a credit score can fluctuate from month to month. Applications for loans, credit score inquiries, one missed payment, or several months of on time payments can all affect a credit score.

A word of warning; there are many companies advertising free credit reports or free credit scores. Those who do not carefully read the fine print may find themselves enrolled in a credit monitoring program. Credit monitoring programs are for those who would like to monitor their credit more than once a year. Before sending any information, carefully read everything to determine what the fees are, and how long the trial period will be. Knowledge is the consumer’s best weapon.

The FTC approved, free credit report website is www.annualcreditreport.com. Consumers can call 1-877-322-8228 and request a free credit report. According to the FTC, Experian, Equifax and TransUnion will accept free requests only at this mailing address: Annual Credit Report Request Service, PO Box 105281, Atlanta, GA 30348-5281.