Master Your Card » Credit Report

What You Need to Know About Your Employer Checking Your Credit

Amanda — Mon, 09 Jan 2012 21:57:36 +0000

It’s the Catch 22 of a global recession: people are taking hits on their credit rating due to being laid off, while more companies are asking to see credit reports before they hire someone. Ironic? Perhaps. But it’s a practice that is here to stay, as companies use every means possible to make sure they are hiring a good candidate.

Even though it is becoming common practice for employers to check your credit rating, there are certain things you should know. Below you’ll find a list of the essential points, before you are taken aback by an interviewer asking about your credit.

Why are employers checking credit scores?

There are lots of reasons why interviewers may now ask for a candidate’s credit report. Now more than ever, it’s become a standard part of the routine background check companies usually do before hiring someone.

Companies want to make sure that they are hiring individuals who meet their responsibilities in a timely manner, and won’t have any serious financial distractions that will keep them from their work. It’s also become a deciding factor when a company is looking at two very qualified candidates with similar skills and background. In this case, the candidate with less financial hurdles will probably get the job.

Lastly, employers seem to believe that there is a correlation between financial woes and potential criminal activity. Although the theory is debatable, companies seem to think that those with financial struggles are more likely to commit theft and embezzlement.

A word of note: while employers are not taking too kindly to financial struggles, bad credit looks much better than a criminal record. In other words, you still have a decent chance of getting hired even if you have had a few debts and financial mishaps such as the odd missed car insurance payment over the years, provided that you’re an honest person.

Can I avoid the credit check?

Yes, and yet, practically speaking, no. Employers cannot look at your credit rating unless you give them explicit permission to do so. However, they also have the right not to hire you, so refusing permission for a credit check may land your application on the “no, thanks” pile.

What jobs require a credit check?

As I previously mentioned, credit checks are becoming a norm in many industries and roles. However, there are certain businesses that may be more inclined to checking job candidates’ credit than others. For instance, if you’re applying to work for a bank or some sort of financial service, you may well be asked to undergo a credit check. The same applies for positions that deal with accounts or customers’ money.

Federal and government jobs may also require a credit check. However, they only typically deny a job due to bad credit if the candidate would have direct access to cash at the business.

What counts as bad credit?

If you have had a couple of late payments, it probably won’t hinder you from getting hired. Furthermore, a bankruptcy cannot always legally be held against you – if this is an issue for you, seek further legal guidance to ensure you understand your job-seeker’s rights.

Employers who look into credit history typically look for serious offenses such as fraud, defaulted loans, debt collections, repossessions, foreclosures, and evictions. A minor fiscal mishap is typically not that much of a big deal when they’re choosing their latest recruit.

Image by Brett L.

How Your FICO Score Impacts Your Life

CardMaster — Thu, 28 Oct 2010 15:28:02 +0000

Your FICO score is more than just a credit score – it can have a big effect on areas of your life that, at first glance, completely unrelated to it. No, it’s not just your ability to get credit that is affected by your FICO score, but a whole host of life’s other little challenges. Here are some of the ways that your FICO score can impact your life.

# 1 – It can affect your ability to get a job

Employers will often request to look at your credit score before they’ll consider hiring you, especially if it’s for a job that will involve making financial decisions or handling money. It might sound unfair, but employers often want to know that you’re a safe bet who won’t run off with the profits or make poor money-related decisions due to an inability to manage your own credit responsibly. You have to give your permission for them to see what’s on your credit report so you have the opportunity to deny this request, but you run the risk of looking like you’ve got something to hide.

# 2 – It affects the type of house that you can buy

As your FICO score is used by lenders to determine how big a risk you’re likely to be on repayments, a below-average FICO score can result in you being offering less of a mortgage package, meaning that you’ll need to put down a bigger deposit. The reasoning behind this is that you’re more likely to default on your repayments so they don’t want to take the risk with a large mortgage. In addition, you’re less likely to be offered the better mortgage packages, which can tie you into a worse deal than someone who has a good FICO score. Even if your FICO score does qualify you for a specific mortgage, your monthly payments are likely to be much higher than they would be if you had better credit.

# 3 – It can affect the type of accommodation that you can rent

On a similar note to # 2, your FICO score can also impact on the type of house or apartment that you can rent. Landlords may look at your FICO score to assess the type of tenant that you’re likely to be and whether they should be worried about you defaulting on rent payments. If you’ve got a poor credit score, they may still accept you as a tenant but ask for a higher deposit as security against this.

# 4 – Your insurance premiums could be higher or lower

Some insurance companies use your FICO score to decide how high to set your insurance premiums and whether to accept you for a policy in the first place.

# 5 – You may be denied a bank account

If lenders request your credit report, they may examine your banking history as this is one of the most basic indications that you can handle credit responsibly. As well as this, if your FICO score isn’t very good, your bank may choose to reject your application to open a bank account, especially one that has overdraft facilities. For example, Citibank are known to do this as they conduct in-depth credit checks on account applications.

# 6 – You might not get a contract cell phone

Even cell phone companies can look at your FICO score before they decide whether to approve you for a contract cell phone. If your FICO score already indicates that you’re struggling to manage credit, they may well worry about you paying your monthly bills on time or at all.

# 7 – Even your relationships could be affected

However shallow it may sound, your FICO score could even impact on your relationships. At the most basic level, a bad FICO score can suggest that you’re irresponsible or immature and this can be a turn-off for prospective partners. If you get involved in a more long-term relationship, your FICO score could potentially become a deal-breaker. Depending on how bad it is, you could be denied the opportunity to rent or buy your own home or be approved for a loan to counteract this and this could put the curtains on making plans for your future together.

Finding out your credit score

While you can get your credit report for free from Annual Credit Report (which offers a credit report from each of the three major credit reporting agencies of Experian, Equifax and TransUnion once a year), finding out your credit score takes a bit more work.

The easiest way is to sign up for a trial with one of the credit reporting agencies. Provided that you can cancel the trial in the first thirty days, you should be exempt from having to pay the monthly or annual subscription charges (which are around $20 per month or $90 per year, on average). MyFICO offers a free 30-day trial for its Scorewatch package, which offers credit score tracking to alert you of changes to your FICO score. Cancel within the 30 days and you should get your FICO score without being tied into the subscription.

Improving your FICO score

Don’t despair if your FICO score isn’t very good at the moment, as there are things that you can do to turn things around.

Pay your bills on time. This is likely to be one of the biggest reasons why your FICO score is low as your payment history makes up 35 per cent of your FICO score. Making on-time payments goes a long way towards upping your credit score, and signifies to creditors and lenders that you’re responsible with credit.
Don’t use too much of your available credit. If the available credit limit on a credit card is $5000, it’s tempting to use it. This is a bad move for your credit score as it indicates that you’re living beyond your means. It’s best to use a maximum of 30 per cent of your available credit limit, so that credit card with the $5000 limit should have a maximum of $1500 as a balance.
Don’t close your oldest credit lines. Contrary to popular opinion, canceling credit cards won’t necessarily be good for your FICO score – especially if the card(s) in question go back several years. Getting rid of your oldest credit lines means taking a big hit to your FICO score, as the length of your credit history counts for 15 per cent of it. Another effect of canceling credit cards is the fact that it can change your debt-to-credit ratio by reducing your available credit and making it more likely that you will be using up a higher amount than recommended.

Don’t Get Obsessive About It

Ultimately your FICO score is important, and it’s certainly a good idea to keep an eye on it andm if necessary, take steps to imporove it. Having said that, make sure you keep things in perspective, and don’t start to define yourself by how high or low a certain constantly changing three digit number is.

Photo by rachael hubbard

Credit Score Strategy: Paying in Full vs. Credit Limit Increases

Jack — Wed, 14 Apr 2010 15:50:54 +0000

There’s this pervasive myth going around that paying off your credit card balance in full each month will score you points (literally) with TransUnion, Equifax and Experian. The fact of the matter is that it won’t. And, in fact, you could even be hurting your credit score by purposefully racking up a high balance and then paying it off before incurring a finance charge. Sound crazy? I’ll explain.

Paying off your credit card balance in full is definitely a good thing. The benefits include:

Not paying any finance charges.
Reducing the risk of going into debt.
Avoiding late or delinquent payments (which DO go on your credit report).
Being a good customer in the eyes of your credit card company.

I added that obnoxious emphasis to the last point because there is the key difference between building credit and building goodwill with your credit card company. Both are important to your credit score, but in different ways.

FICO Factors – How Punctuality Matters

Payment history eats up a whopping 35% of the pie that makes up your credit scoring factors. But the credit reporting bureaus are only concerned about whether you pay the minimum amount on time. They could care less if you overachieve by paying off your credit card in full each month. That’s because the carrying a credit card balance is part of the agreement between you and your credit card company. You’re not breaking any rules by doing so. While incurring finance charges may be less economical on a personal finance level, it is by no means a penalty and is not indicative of your inability or unwillingness to stick to the terms of your contract. It’s merely a money management choice.

Timing Issues and High Balances

In fact, paying off your debt in full each month may even less beneficial than you thought because of the way the credit reporting bureaus pull your information. The second biggest slice of the FICO pie is amount owed, which takes up 30%. This is a measurement of your credit to debt ratio, or how much you owe vs. how much you can borrow. So, if you pay off your credit card balance every month, that ratio should be very low, right? Nearly zero, even. Wrong.

Let’s say that you have a balance of $1,000 on your credit card with a $2,000 limit and you intend to pay it off on the 23rd. Meanwhile, the credit reporting agencies pull your file on the 22nd. Guess what? It’s going to show up as if you had a 50% credit utilization, even though it would’ve been zero if they would’ve pulled the information two days later. This is an extreme example, but having a credit utilization of 30% or more can bring down your score by 10 to 20 points.

Fixing the Credit Ratio Quirk

It’s not all bad news, especially if you really are in a position to pay off your credit card in full each month. If so, that means that you have reasonable income and assets and probably qualify for a credit line increase. And since you’ve been such a great, responsible customer who has never missed a payment, your chances for getting a credit line increase are even higher.

Extending your credit line will directly help your overall credit to debt ratio. But it also may help to start charging less on your credit card as well. Use some of that cash that you were saving for the end of the month and buy things the old fashioned way until you get your average credit utilization well below 30 percent at any given time. In this way, you’ll be attacking the issue from both ends and you can reclaim some of those stray FICO points that you deserve.

Got a tip for cutting down your credit to debt ratio? Share it in the comments!

img c/o anthrocopy

Free Credit Reports – Post-FTC Crackdown

Jack — Thu, 01 Apr 2010 00:35:02 +0000

Those hooky satire songs from FreeCreditReport.com hide a dark secret. First of all, that dude is a French-Canadian, so he probably doesn’t even have a credit history in the U.S., and to make matters worse, that supposed dreamboat minstrel doesn’t seem quite as endearing once you realize that your “free” credit report actually came with a $79.95 annual membership (that is if you if you forgot to cancel or didn’t read the fine print). Raw deal.

Luckily, the FTC is fighting back on your behalf. Their first wave of attacks was a series of spoof ads that claimed that “anyone can write a catchy jingle, but only annualcreditreport.com provides you with a truly free credit report.” While they were dead wrong about their first statement (compared to the tunes that Eric Violette lip syncs, the FTC’s songs suck big time), they are right about the second. To be fair, though, once you log on to annualcreditreport.com, you’ll be assailed with sneaky offers for credit monitoring services once they pass you off to Transunion, Equifax and Experian, respectively. Plus, anyone who believes they get a free credit score from the FTC will be disappointed.

As the next part of the FTC’s crusade against the melodic misleaders, the commission has rolled out a new rule that forces companies like freecreditreport.com to include a prominent disclosure on their website that informs visitors that:

THIS NOTICE IS REQUIRED BY LAW. Read more at FTC.GOV. You have the right to a free credit report from AnnualCreditReport.com or 877-322-8228, the ONLY authorized source under federal law.

The links and phone number are mandatory, too.

This goes into effect on April 2nd. But come September 1st, things will get worse for guys like Violette and Ben Stein, when disclosures that state that “This is not the free credit report provided for by Federal law” will have to be included on audio and video advertisements as well. Which raises the question: “What rhymes with Federal law?”

More Facts About the Law

According to the final rule filed on March 3, 2010 by the FTC, the commission is exercising its right to clamp down on freecreditreport.com and others like it under the Credit Card Accountability Responsibility and Disclosure Act of 2009, which went into full effect in February 2010. Other interesting tidbits from the official rule:

Transunion, Experian and Equifax are barred from advertising on AnnualCreditReport.com until they comply with new disclosure rules. Apparently, they had ads on the official FTC site before, which (understandably) confused consumers.
The big three credit reporting agencies are no longer allowed to require you to set up an account in order to receive your report. However, doing so makes things easier the next time around when you want to pull your report again. You can still be asked to set up an account, but not until after you get your free credit report.
The FTC doesn’t have the power to ban the use of the word “free” in marketing materials, even in cases where the free-ness of the item is contingent on a purchase, which is probably a good thing. This is America, land of the free, right? A ban on free-dom would be a major blow to BOGO offers and coupon clippers nationwide.
Along with the disclosure and hyperlinks, websites must also include an eye-catching button that reads “Take me to the authorized source.” They even lay out a few rules for making sure that it stands out when compared to the commercial website’s own call to action buttons. Someone in the FTC must have a cousin who is a web designer.
The FTC went out of their way to make sure that YouTube videos advertising sites like freecreditreport.com didn’t slip through a loophole. Commercials on web 2.0 multimedia sites must also comply. And to make sure that they do, the FTC has hired a guy who will “monitor and evaluate the effectiveness of this section [of the law] and evaluate innovations in technology and advertising and will consider additional changes as necessary to achieve the statutory mandate.” Professional YouTube watchers, brush up your resumes!

Conclusion

So, what does this mean to you? Probably nothing, if you’re an MYC reader, since we’ve reiterated time and time again that annualcreditreport.com was the only real source for government sanctioned free stuff and you already knew all this. Plus, the credit monitoring services are still available with free trials if you’re interested in checking them out. Seeing as there is still no such thing as a free credit score from the government, it may be worth your while to give one of these free offers a try (read our review of TrueCredit Credit Monitoring from Transunion here). Just remember to read through the fine print and cancel on time if you’re not interested in paying the fees.

img c/o puci

TrueCredit – Free TransUnion Credit Monitoring

Jack — Tue, 17 Nov 2009 14:33:18 +0000

If you’ve ever signed up for a free credit report, you’ve likely been pitched on TransUnion Credit Monitoring. Like most people, I declined this option and opted instead to save my $11.95 a month. But after finding one too many mysterious charges on my credit card statement, I decided to give it a whirl. Plus, there’s a free 30-day trial available – so I really had nothing to lose.

First, a little bit about TransUnion’s TrueCredit Credit Monitoring. Basically, TrueCredit gives you:

24 hour notification of suspicious changes to your credit report
Immediate and unlimited access to your credit report and credit score
Ability to “lock” your TransUnion credit report for added security
Slick “Trend” breakdowns for your debt, savings, credit score and more
Daily updates your TransUnion report and credit score once a day
$25,000 Identity Theft Insurance
A library of educational articles, worksheets and other resources

You can cancel your TrueCredit account within 30 days and you won’t owe a dime. Of course, you get to keep your credit score and report (if you printed it off), which is well worth the $12 anyway, seeing as you don’t get a credit score from AnnualCreditReport.com.

Sign up for your free TrueCredit Credit Monitoring 30-day trial now.

The signup process is extremely simple – after punching in your ID info, it’ll tell you if you already have an account and all you’ll have to do is log in.

Be sure to check the box to activate your 30-day trial

When you are placing your order, either as a new member or a returning customer, be sure to check the box that says “Check the box to start your 30-day risk-free trial, $11.95/month thereafter.” I can’t speak from experience, but I imagine that failing to check this box would forgo the trial and just skip to paid membership (not sure why anyone would want to do this). Also, decline the optional shipping box below. It costs $5.95 and all that paper makes Mother Earth all weepy and sad.

Check to begin your free trial, uncheck to opt out of hard copy.

On the next page, you’ll enter your credit card information (for verification purposes, they say). But as you’ll notice, they do say that they won’t charge you until your trial is up.

Again, make sure to leave the optional shipping box unchecked.

Opt out of hard copy and junk emial

Next, you’ll be graced with one of several affiliate offers. This one is saying I’ll get a $15.00 rebate for my TrueCredit purchase, which is a bit misleading. You do not have to accept this offer in order to get your free trial. The TrueCredit free trial is truly free – no strings attached. So go ahead and click that teeny tiny little “No thanks” link and move on.

"No thanks" to this offer

You’ll then be shown a receipt. Print if off or PDF it and then click through to your information.

Under the “your credit” tab you’ll see where you can view your credit reports, trending, credit alerts, and most excitingly, your credit score.

As you can see, you get your TrasnUnion credit score immediately. Don’t mean to brag, but looks like my credit score is rockin’ (750 is a good credit score).

I'm great!

If you’re like me and need even more positive reinforcement just to get through the day, there’s a little Venn diagram at the bottom, too. Looks like I’m right on the cleavage between “good” and “very good.” Nice.

The sweet spot.

As you can see, you can add your Experian and Equifax scores as well – for a price. The one that I might go ahead and grab is your Experian score. Unlike Equifax and TransUnion, which use the FICO scoring method, Experian uses VantageScore. It’s a different scale and is factored a bit differently as well.

Another feature that you might be interested in trying is called “TrueCredit Lock.” This, as explained in this screen shot, prevents others from looking at your TransUnion credit report and will “help stop ID thieves from obtaining credit in your name.”

Kinda cool

The idea is that whenever you apply for a credit card or mortgage, the lender will have to pull your credit report. And they can’t do that without you popping back on this site and unlocking your TransUnion account.

The rub is, though, that it doesn’t lock out your Equifax and Experian credit reports. You’ll have to go directly through them for a service like that.

It’s also important to note that there is a difference between TrueCredit Lock and the much advertised LifeLock. LifeLock works by submitting a “fraud alert” to the three credit reporting bureaus every 90 days, which is something you can do yourself for free and is a borderline abuse of the system. TrueCredit is just TransUnion exercising its right as a private institution to withhold information about you by your request.

All in all, I’d have to say that I was actually kind of impressed with TrueCredit. The trending features seemed very interesting – there were tools for tracking your debt-to-income ratio and the progression of your credit score over time. It kind of reminded me of the latest personal finance tools from the likes of Mint and Thrive. If you were on a plan to turn around your credit rating, this would be a pretty powerful tool – especially because it lets you get a new, updated report once every 24 hours. I will note that, in spite of this, I couldn’t find mention of my recent Lending Club loan, although Lending Club does say that they disclose information about your account to all three bureaus. It’s possible that my account is too new, though. The reason I cancelled is that after reviewing my report and score and finding it better than I expected, I decided that I don’t really need to monitor my report more than once a year, but of course, YMMV.

Have you signed up for the 30-day free trial from TrueCredit? Chime in with your experience with credit monitoring in the comments section below.

Getting Your (Actually) Free Credit Report from SmartCredit.com

CardMaster — Mon, 19 Oct 2009 10:45:07 +0000

Thanks to a new 5-day Free Trial offer, you can now get a free credit report from SmartCredit.com. In addition to a rundown on your credit history, SmartCredit.com offers you tools for monitoring your credit, such as SMART Credit Report Lock, SMART Alerts and SMART Action Button, which helps you dispute inaccurate items on your report. Your free trial gives you access to these features for 5 days – after that, you’ll be charged $19.95 a month. But if all you want to do is view your credit report, you can cancel within the first 5 days without paying a penny. Here’s how:

1. Visit SmartCredit.com

Click here to sign up for the free trial at SmartCredit.com. You will be prompted to enter your name and e-mail address, as well as your zip code. Click “Start Free Trial” after you have done so.

2. Enter Your Information

Next, you’ll be asked to enter some additional basic personal information. Do so and click “CONTINUE WITH FREE TRIAL.”

3. Enter Your Billing Information

After you click through, you will be presented with additional fields to set up your login information. Enter your desired username and password and click “CONTINUE WITH FREE TRIAL.” Finally, you’ll also be asked to enter your credit card information, but don’t worry. This will only be charged if you fail to cancel within 5 days. They will, however, send a $1.00 authorization through just to make sure that the card information is correct. Before clicking “ACTIVATE FREE TRIAL” make sure you check that you agree to the terms. IMPORTANT: Leave “upgrade to enhanced membership” unchecked. Checking this box will immediately sign you up for the premium membership, thus skipping your free trial.

4. Click “ACTIVATE”

On the next screen, you’ll be given your registration confirmation. Click “ACTIVATE” to activate your membership. Note that you’ll also be asked to add do-not-reply@SmartCredit.com to you spam exceptions. Do so – most e-mail services, such as Gmail, will place messages from SmartCredit.com in your spam filter.

5. Enter your Social Security Number

You’ll next be asked to confirm your personal details again and enter your Social Security number and date of birth. Don’t worry – this information is necessary to retrieve your report and verify your identity. Take comfort in the McAfee Secure and GeoTrust logos at the bottom of the screen. Click “CONTINUE” to go on.

6. Verify Your Identity

Next you’ll be given a little quiz about your credit history. They will ask you questions about previous addresses and accounts you’ve opened. Oftentimes, the answer is “none of the above,” so don’t be thrown when none of the options look familiar. Click “SUBMIT” when you are done.

7. Click “CONTINUE”

The next screen merely tells you that you’ve activated your account. It will also tell you about Credit Report Lock, which alerts you whenever new credit is opened in your account. Sign up for it if you like, but it is not free.

8. Click “VIEW YOUR SMART CREDIT REPORT”

The next screen gives you a tutorial on how to navigate your SMART credit report. The navigation is pretty self explanatory, but if you’d like a rundown, feel free to peruse it here. If you are ready to go on, click “VIEW YOUR SMART CREDIT REPORT.”

9. View Your SMART Credit Report

Congratulations! You are now viewing your SMART credit report. The first screen is your summary, which gives you an overview of your credit report. You can filter the view using the buttons on top. Or you can simply cycle through the pages in order by clicking the arrow on the right.

10. View Your Credit Score

One feature that isn’t included on most free reports is the Credit Score view. By clicking “Credit Scores” you can see a breakdown of your credit score, your auto score, your insurance score and your employment score.

11. View your Credit Accounts

You can view specific information on your accounts by clicking the name of the creditor at the top. This shows you information such as account status, creditor remarks and your payment history.

12. View Inquiries

This section is also of particular interest. Inquiries show you when companies or lenders pull your credit report. These credit inquiries can affect your score and may be indicative of identity theft, if you do not recognize them.

There you have it – a free credit report and credit score! Don’t forget to cancel your account within the 5 day period or you’ll be charged.

Instant Free SMART Credit Report

Photo by me and the sysop

A Step-By-Step Guide to Getting Your (Actually) Free Credit Report without Accidentally Signing Up For Extras: Part Three Equifax

Jack — Thu, 24 Sep 2009 11:49:46 +0000

In the third and final part of this series on getting your free credit report without the not-so-free extras, we’ll be looking at Equifax, one of the trickier credit reporting agencies.

1. Begin by signing onto AnnualCreditReport.com and selecting your state. You’ll be prompted to enter some identifying information, if you haven’t done so already.

2. On the next screen, check Equifax and click “Next.”

3. The information you filled out in step one should carry over to the next screen. Confirm that it is accurate and click “Continue.” Note: for privacy reasons, you may wish to mask the first five digits of your Social Security number.

4. Next, you’ll be asked a few questions about your credit history to verify your identity. As before, the answer is very often “None of the above.” Choose the correct answers and click “Continue.”

5. This screen is where things get tricky. Here, there are only two buttons. Both of them result in you paying money to see your FICO score. Note that this is not the same as your credit report and you are not entitled to it for free pursuant to the Fairness in Lending Act. To receive only your free credit report, click the somewhat buried link reading “No Thanks, I Don’t Want to Know My Score.”

[equifax4.jpg]

6. Next, you’ll be presented with a few more “special offers.” Go ahead and skip them all – they are all paid services that have nothing to do with your credit report. Make sure that your total price listed is $0.00 and the price is “Free” before clicking “Submit.” If all you wanted was your free credit report, stop now. You’ll automatically be taken to your Equifax credit report.

7. If you select “Yes” on any of the “special offers” you will be prompted to enter your credit card information and agree to some terms. Note that you are not obligated to make any payments or agree to any additional terms in order to receive your free report. If you are prompted to enter your credit card information, make sure that you have answered “No” to all the options.

8. If you do decide to sign up for the extras, you will need to create an Equifax account. Make sure you click “I choose to opt out” in order to avoid getting any extra junk mail.

By now, you have hopefully learned the fundamental instincts needed to avoid signing up for extra services when getting your free credit report. Note that while you will always be entitled to a free credit report by federal law, the deceptive tactics of TransUnion, Equifax and Experian are subject to change. The next time you think you’re getting something for free, including credit reports, keep the following in mind:

Ask Yourself: Why am I getting this for free? What’s in it for them?

When you get a free t-shirt, a free coffee mug or a free sticker you are advertising for the company. When you get a free tote bag from your bank it’s likely as a “thank you” gift for signing up for a checking account. There is always a good reason for a company or agency to give you something for free. If there isn’t, then it’s more than likely not free at all. In the case of your annual credit report, it’s free by federal law.

Always read the fine print before checking a box or leaving a box unchecked.

Many websites like to auto-fill your forms for your convenience. In most cases, the default options are ones that result in you signing up for an extra service. Look for boxes that say “I opt out of this service” or “No thanks, please just send my credit report” and check them. Leave anything such as “Yes, I’d like my FICO score for $7.95” unchecked. Read all of your options before clicking submit.

Think before you click.

In most cases, as you’ve seen in this series, the most inviting button typically leads to extra fees while the free option is a barely visible link buried beneath it. If you find yourself stuck between choosing: “Yes, I’d love to pay more money!” and “Yes, please charge me extra!” look harder for the “No thanks, please give me my free report and leave me alone” link. It’s in there somewhere, you just have to find it.

Never enter your credit card information.

A seemingly obvious tip, but because some companies (such as airlines) use credit cards for identity verification, many consumers get tricked into authorizing one of the credit reporting agencies to charge their credit cards. To be safe, never enter your credit card information, even if you are prompted to do so. Receiving your free annual credit report uses a different method of verification that does not require you to enter a credit card.

If all else fails, request by mail.

The easiest, though perhaps not the quickest, way to get your free credit report without signing up for junk is to get your report by mail. To request your credit report by mail, simply print out the one page PDF on AnnualCreditReport.com and mail it to:

Annual Credit Report Request Service

PO Box 105281

Atlanta, GA 30348-5281

That way, you can get your report directly through the Annual Credit Report Request Service without dealing with Equifax, TransUnion or Experian’s circuitous websites.

So, there you have it. Enjoy your free credit report as well as your highly refined junk mail, paid service and scam repelling skills. Go forth and spend nothing on free* offers.

Photo by Justin Marty

Guide to Getting Your Free Credit Report from GoFreeCredit.com

Jack — Wed, 02 Sep 2009 22:50:55 +0000

GoFreeCredit.com is another vendor that offers you a free credit report when you sign up for their credit monitoring service. This credit monitoring service is $14.95 a month – but as long as you cancel within 7 days and don’t accidentally sign up for any additional services, you can get a legitimately free credit report instantly. If you’ve already used up your three free credit history reports from AnnualCreditReport.com, this method is an excellent way to get just one more freebie.

1. Sign up at GoFreeCredit.com

Click here to get your free credit monitoring trial from GoFreeCredit.com. Be sure to click this link to get the free offer. You’ll be asked to enter some basic contact information – do so and click “Get My Credit Report Now!” NOTE: Be sure to opt-out of the e-mail offers by leaving the checkbox unchecked.

2. Continue to your free credit report

The next page will ask you if you want to speak with a credit improvement specialist. This is not necessary to receive your free credit report. Feel free to leave all the fields blank and click the button circled in green.

3. Enter additional information

On the next screen, you will be asked to enter your complete contact information. Do so and click “Submit and Continue.” NOTE: To receive e-mails from GoFreeCredit.com, you will have to add them to your exceptions list – otherwise, the messages will be put in your spam folder.

4. Enter identifying information and credit card

Here you will enter your identifying information (which is necessary to pull your report) and your credit card information. NOTE: You will not be charged when you enter your credit card information. GoFreeCredit.com will, however, run an authorization through for $1.00 to verify the information. However, do take note of the paragraph on the right informing you that if you do not cancel your membership you will automatically be enrolled in the credit monitoring service for $14.95 a month. After you have read this page carefully, check “Agree” and click “View Report.”

5. Confirm your order

You will be taken to your order confirmation page. Write down this information for future reference and click “View Credit Report & Score.” Also, be sure to answer the security question in case you forget your username and password – you will need this information to cancel your free trial.

6. Click “View it Now”

Click “View it Now” to be taken to your credit report. You can also opt to receive information on additional services, but this is not necessary.

7. Answer the security questions

You will next be asked some questions about your credit history. This is standard operating procedure. Oftentimes, the correct answer is “NONE OF THE ABOVE” so don’t worry if none of the answers appear familiar. Click “Process Order” once you are done.

8. View and print your credit report

Congratulations! You are now viewing your free credit report from GoFreeCredit.com. For future reference, print out or PDF your report by clicking “Printer Friendly Version.”

9. Call customer service

In order to cancel your report, you have to call their customer service line directly. Click “Contact Us” at the top right corner of the screen and choose “Cancel an Order” on the dropdown menu. On the next dropdown menu, choose “Free Trial Orders” and then on the last menu, choose “How do I cancel my Credit Monitoring/Score Tracker trial membership.” You will be given the customer service number: (866) – 883 – 3309.

Call the number provided on the contact page within business hours. For best results, call during off-peak hours. For example, I called at 8:01AM EST and had my free trial canceled in five minutes. The automated system will bring you to a phone tree.

Press 1 to cancel your free trial. The representative will ask for your Social Security number or your order number (written down from step 5). He or she will then confirm your full name and date of birth and e-mail address.

Before they let you go, the representative will go over the benefits of the services you are signed up for. Wait patiently for them to go through their pitch (it’s their job) and politely decline. The rep will next offer you some other perk – in my case it was a free month of membership beyond the trial period. Again, decline. After that, the rep will cancel your account and give you a confirmation number. They will also e-mail you a cancellation confirmation. Before you get off the phone, doublecheck that all of your services have been cancelled and that you will not be billed for anything else.

10. Open your confirmation e-mail

In the next twenty minutes or so, you should receive a cancellation confirmation e-mail. IMPORTANT: Be sure to check your spam folder if it does not appear. Further action is needed to cancel your account.

Click the link provided to finish canceling your account. You can either login using your username and password (provided in step 5) or with your SSN and DOB.

11. Recover your username and password

Click the second link if you have forgotten your username and password. Enter your identifying information and click “Continue.”

12. Enter your security question

To login, you will have to answer the security question in step 5. Click “Continue.”

13. Click “DE-ACTIVATE MONITORING SUBSCRIPTION”

Read over the warning and click the button below. This is just one of several efforts to get you to change your mind.

14. Answer the reason for canceling

How you answer here affects the offer they will provide for you in order to convince you to stay enrolled. Select your answer and click “TELL ME HOW YOU CAN HELP.”

15. Decline the special offer

You will be given a special pricing to continue your membership. Check “No, thanks. I waive my right to this special price” and click “SUBMIT AND CONTINUE.”

16. Confirm your cancellation

Finally, you will be given confirmation of your cancellation. Read this page over carefully – it informs you that you will still receive e-mail alerts during your free trial and will receive services until the end of your billing period if you have already been billed.

That’s it – you just got a credit report from GoFreeCredit.com and didn’t have to pay a cent. Avoid logging back into your account once your membership is canceled, as this may reactivate your account. Instead, simply reference the report that you saved or printed in Step 8.

Photo by ohadweb.

A Step-By-Step Guide to Getting Your (Actually) Free Credit Report without Accidentally Signing Up For Extras: Part Two – Experian

CardMaster — Thu, 13 Aug 2009 12:09:10 +0000

In part two of our series, we’ll be showing you how to pull your credit report from Experian without accidentally signing up for any subscriptions (check out Part one – Transunion). That is, we’ll be getting your credit report absolutely free, in spite of nearly every other force colluding to induce you to buy something. In part one of our series, we walked through the process of starting an AnnualCreditReport.com session. We’ll pick up where we left off there.

1. The first thing Experian will ask you for is the last four digits your Social Security number. They’ll use this to check to see if you are eligible for a free report. You are allowed one free report every 12 months. If you’ve already pulled your report this year, they’ll ask you if you want to buy one instead. Anyway, type in your digits and hit “Submit.”

2. On the next screen, they’ll try to sell you Triple Advantage Credit Monitoring. This costs $14.95 a month and essentially alerts you anytime something happens to your credit report. It’s not necessary, and certainly not free. In the “Important Information,” they even note that this offer is not affiliated with the free report from AnnualCreditReport.com. Skip this and the offer to see you Experian Credit Score for Only $5.95 (this isn’t the same as your report, note, and is NOT free) and click the sad, boring looking “Annual Credit Report” button.

3. Next, Experian will confirm your order. Ensure that the grand total is $0.00 and check that you’ve read the terms and conditions and click “Submit.”

4. Experian will now ask you to verify your identity. This part is kind of fun, actually – it’s like a pop quiz, but all the questions are about you. It’s also a bit disconcerting to know how much information the credit reporting agencies have on you, but it’s ultimately for your own good. Often, the answers will be “None of the Above” so don’t stress if the options seem out of left field. Fill them out and hit “Continue.”

5. Congrats! You’ve got your free report and you didn’t sign up for any junk. Click “Print Your Report” and print a hard copy or save a PDF for future reference. You won’t get a free report from Experian until next year.

6. To return you AnnualCreditReport.com,. click the “Return to AnnualCreditReport.com” button at the top. Note that this bar should always be present on the screen – if it’s not, do not proceed. It means you’ve been taken away from the AnnualCreditReport.com offer. When you click the button, Experian will let you know that you’re leaving. Click “OK” to go back to AnnualCreditReport.com and move along with any other credit reports you’d like to pull.

There you have it – you’ve got your credit report from Experian and no one had to pay a single cent. Experian is one of the friendlier websites to deal with – next time, we’ll tackle Equifax, which is the most confusing of the three credit reporting agencies. And remember, that the only place you can get a free report is AnnualCreditReport.com. For more information, see the Federal Trade Commission (FTC) website at http://www.ftc.gov/freereports.

Repairing Bad Credit and Why You Should Bother

Kristy — Thu, 30 Jul 2009 14:00:25 +0000

Repairing your credit isn’t easy and it isn’t fun, I should know. But, it’s possible to do if you have the patience and will to get it done.

Why Bother?

I’ve had a number of clients over the years who’ve asked me that question. Why should they bother to clean up their credit, what good is it to them? Well, most of us understand that our credit is what determines whether or not we can get various loans, and then what interest rate we’re offered for it.

At some point in our lives, most of us have had the need for a home loan, car loan, or general purpose loan. With bad credit, you’ll be hard pressed to be approved for these types of loans and if you are approved, you’ll have higher interest rates, which equates to more money out of your pocket. A 9% rate on a $150,000 mortgage is a lot of money. It’s much different than paying 9% on a $15,000 car loan. If you want good rates that will save you money and allow you to spend it on other things, rebuilding your credit is a great way to start.

Every once in a while I’ll get someone who doesn’t think this explanation suffices. They say they don’t need a car loan or a house loan; they can just rent and keep their old car. Ok, fine. Let’s take a look at that scenario then. Almost every apartment complex, utility office, and insurance company checks your credit before signing you up.

Your credit report reflects your payment history and all of these vendors want to know that you’ll pay them. If you’ve ever applied for an apartment and were told that you need a deposit including first and last month’s rent, that’s because you have no credit or bad credit. If your electric company wants a $200 deposit before they connect you, that’s because you have no credit or bad credit. If you want to be able to get electricity turned on in your place – be it a house or an apartment – and not have to pay through the nose to do it, you need to repair your credit.

What if you live with friends and everything is in their name? Do you still need to worry about your credit? Well sure. What about your car insurance? If you have bad credit, your premiums could be higher or you could be flat out refused for coverage. You see, you’re a risk and no one likes a risk, especially in today’s market. There is very little in this life that doesn’t depend on our credit rating anymore.

I drag this out to illustrate a point. There aren’t many scenarios in which it would be appropriate for someone not to be concerned about their credit score. I know there are plenty of people who aren’t the least bit concerned about it; however, they should be.

Bottom line: Having bad credit costs you more money.

What is bad credit?

As strange as this may sound, many people don’t know the difference between bad credit and good credit. If that’s the case for you, not to worry, you aren’t alone in that respect. Before we talk about fixing your credit, though, let’s talk about what bad credit is and where it comes from.

First of all, it’s important to know who determines your credit score and how they determine it. Your individual score is based on the formula from the Fair Isaac’s Company. This company works independently from the three credit bureaus and uses their unique formula to assign your credit report a number based on your history.

The credit score was invented as a short-hand method for banks and lenders to assess a borrower’s creditworthiness. Going through a credit report is time consuming for lenders and so Fair Isaac’s created what is commonly called the FICO score. This score is comprised of various factors from your credit report and then computed to produce a number between 300 and 850.

The lowest possible credit score is technically 0, this means you don’t have any credit at all. However, once you start amassing credit, your score will jump up and fall between 300 and 850. This is simply a range that Fair Isaac’s developed for the purposes of providing lenders with a “snapshot” of your financial picture. The higher your number, the more creditworthy you are considered.

Given this information, what then is considered bad credit? Numerically speaking, the magic number that most lenders are looking for is 620. Anything below that and you’re extremely lucky to get credit at all. If you do, then you’re looking at pretty high rates. From 620-680 is considered good credit, and the average American credit score runs at about 680. Anything over 680 and you’re moving into very good and excellent credit.

One thing you have to realize when looking to repair your credit is that it is very difficult to achieve a perfect credit score, in fact, only 1% of the population has done so. However, someone with a 720 credit score is going to get as good a deal as someone with an 820 credit score, despite the 100 point difference. This is because lenders typically tier their rates based on score groups. So someone with a 720+ credit score is one group. The next group may be 680-719, the one below that may be 620-679, and so on. The tiers will vary per banking institution and lender; however, the point is that a perfect score is not necessary to get the very best rates on the market. The rate will be determined based on the score group you fall into.

So now that we’ve talked about the range and what constitutes bad credit, let’s talk a little about how that score is determined. Unfortunately, the exact formula that FICO uses is not known to anyone besides themselves. There is also going to be some changes made this year to the formula, so what’s listed here could change, depending on what FICO determines with the new scoring model.

However, we do have a fair idea of what goes into the scoring model as it currently stands. As such, the breakdown is as follows:

35% – Payment history
30% – Amounts owed
15% – Length of credit history
10% – New credit
10% – Types of credit used

So, you can tell from just a glance that the biggest factor in determining your credit score is payment history. That is why you will hear people say that paying your bills on time will have such a big impact on your score. It may seem like such a simple thing, but the fact is, people lend you money with the expectation that you will repay it on time, as per the terms agreed upon. It makes perfect sense, then, that this should also be the largest factor in your credit score. Remember, the credit score is merely a “snapshot” of your credit report.

The next largest item is amounts owed. No one wants to lend to someone who is maxed out on all of their credit cards because the message that sends the lender is that you can’t handle anymore credit. This is also why you’ll hear people say to keep low balances on your credit cards. Anything too close to the credit limit will affect your score, and by extension, your ability to get new credit.

Obviously, the length of time you’ve been in the credit bureau will affect your score, and this is also why only 1% of the population has reached 850. To get up to 850, you have to be in the credit bureau for at least 30 years. But, the point of a credit report is to show your history and lenders like to see a solid block of positive repayment history.

New credit and types of credit are each at 10%, meaning they play a role in your score, but are not nearly as important as the others. While they aren’t as important as the other factors, you still want to watch the number of new accounts you open and keep a fair balance between revolving lines and installment loans. Just to clarify, revolving lines are usually credit cards. They refer to lines of credit that can be used again and again as the balances are paid down. Installment loans refer to standard loans with a fixed rate and a fixed term. Repayment over that term will result in the loan being paid in full and closed.

How to Repair Your Credit

Now that we know why it’s important to repair our credit reports and what is considered a bad score, let’s look at how we would go about repairing it.

Step 1: Get a copy of your credit report

In order to know where you stand, you’ll need to get a copy of your credit report. Normally I advocate getting one copy from one of the three credit bureaus every four months, that way you have a steady idea of where you stand throughout the year. However, in this situation, I believe it is important to have the full picture sitting in front of you. As each of the three credit bureaus is a little different in the information they list, you may have things showing up on one that’s not on another. You’ll want to know.

You are entitled to one free copy from each of the credit bureaus every year. If you have not already pulled a copy for the year, then your request should be free. However, the credit reports themselves do not include the score. If you want the score, you’ll need to pay for that separately.

Keep an eye out here because we’ll be posting a guide on how to read your credit report, step by step. You’ll get to see just what a lender looks at when they make decisions, and hopefully, you’ll have a better understanding of the things you need to be looking for. In the meantime, if you need help with looking over your credit report, visit your personal banker at your local bank or credit union, or your personal financial advisor with your brokerage firm. Either should be able to help you, or at the very least, direct you to an expert.

Step 2: Check for errors

Once you’ve got your report(s) sitting in front of you, the first thing you want to do is make sure that the information listed is correct.

- Double check the name and social security number.

It is not uncommon for Jrs., II, and III to get mixed up so make sure you’ve got your report and not your father’s or brother’s.

- Be sure the address and employer are current.

Lenders like to see consistency and they like accurate information. Making sure you have the most up-to-date information listed on the report reflects well on you.

- Go through your accounts and check for mistakes.

If there are any accounts that do not belong to you, show open when they should be closed, were closed by you but do not say “closed by customer,” show late payments when there were not any, or list bankruptcies not identified by their chapter, be sure to inform the credit bureau immediately.

Each credit bureau has a dispute form online that you can fill out, or you can hand write (or type) a letter to them. This secondary method is actually preferred because you are able to include supporting documentation for your claims. If you have supporting documents, send them in.

The credit bureau has 30 days to investigate the claim and get back with you on a decision. If you disagree with the credit bureaus decision, you have the right to send an explanation to be attached to your credit report so that lenders and others pulling your credit can view it. The credit bureau must attach it to your file.

Here’s an example of a good dispute letter:

Date
Your Name
Your Address
Your City, State, Zip Code

Complaint Department
Name of Credit Bureau
Address
City, State, Zip Code

Dear Sir or Madam/To Whom It May Concern:

I am writing to dispute the following information in my file. The items I dispute also are encircled on the attached copy of the report I received.

This item (identify item(s) disputed by name of source, such as creditors or tax court, and identify type of item, such as credit account, judgment, etc.) is (inaccurate or incomplete) because (describe what is inaccurate or incomplete and why). I am requesting that the item be deleted (or request another specific change) to correct the information.
Enclosed are copies of (use this sentence if applicable and describe any enclosed documentation, such as payment records, court documents) supporting my position. Please reinvestigate this (these) matter(s) and (delete or correct) the disputed item(s) as soon as possible.

Sincerely,

Your name

Enclosures: (List what you are enclosing)

You can find this same letter at myFico.com under their samples. I use this letter as an example because it works. It’s the same letter I sent to the credit bureaus when I had charges to dispute and it covers everything that the credit bureau needs in order to get the dispute processed. You merely have to fill in the blanks.

Step 3: Work on cleaning up the credit report

If you had some errors on your report and you’ve gotten them fixed, you may have noticed an increase in your credit score. Congratulations. That’s the easy part. Now comes the tough part. First off, understand that while it is easy for your credit score to drop, it’s much more difficult to raise it. This is mostly because it takes time to build a good credit history.

First of all, it is important to understand that any derogatory accounts or collections listed will remain on your credit report for seven years – unless they are removed beforehand for whatever reason. After the seven years, if the item isn’t paid, the collection agency can put it back on and the seven years starts all over again. This does happen, so just be aware. If you’re a few years away from seven years and thinking you can dodge paying someone, think again. It can come back to haunt you.

Now, there is a little silver lining in this news. A collection or derogatory account only affects your credit score for five years. So, even though it’s still on your report, your score won’t be impacted by it anymore. However, lenders still look at the whole report. And just because that collection isn’t factored into your score doesn’t mean we don’t consider the possibility that you won’t repay us.

While a good score is important, it’s not the end all of the lending process. I’ve had customers apply for loans with a 700 credit score that we’ve had to deny because of past history, public judgments, and various other derogatory accounts on a report. Typically, the score you carry – assuming all other factors are in accordance with an approval – will determine the interest rate you would qualify for. It’s not a determining factor on its own. The point of this guide is to help you clean up your credit report, not just improve your score, though by extension, improving the one does help improve the other.

Ok, moving into how you can clean up your credit report.

Payment History Tips

As your payment history accounts for 35% of your overall credit score, this is the largest area to focus on. Here are some tips to help you get there.

- Make a budget.

Bet you didn’t see that coming! Seriously, you need to get to a point where payments can be made without struggle and be on time. In order to do that, you need to know precisely what’s coming in and what’s going out. If you’ve been avoiding the ‘b’ word for some time now, you’ll want to get acquainted.

- Make your payments on time – every month.

Now that you’ve got a budget all worked out, you’ll want to make your payments on time from here on out. This will help you build a positive repayment history that looks solid to lenders.

- If you’re behind on anything, catch up and stay there.

If you have bills that are past due, call your lenders and make arrangements. The worse thing you can do is ignore them, so be proactive and call them first. Once you’ve gotten yourself caught up, stay there. Remember, you need positive repayment history over a period of time in order to improve your credit report.

Amounts Owed Tips

The next largest item that’s factored into your score is the amount of money that you owe other people. It accounts for 30% of your overall score and is the area that most closely affects your debt-to-income ratio – a number that if too high, even an 800 credit score can be turned down for.

- If you still have credit cards, keep the balances low.

The ideal balance-to-limit ratio is 40% if you’re carrying a balance. This shows that you are capable of using the card responsibly and makes lenders more comfortable giving you money. When you have high outstanding debt, it negatively impacts your score and lenders are not likely to add to that debt.

- Pay off your debt when you can rather than moving it around.

Sometimes it is tempting to take advantage of low rate offers and move large balances to lower rate cards; however, you still have the same amount of debt – which was the problem in the first place. If you want to improve your score, pay down the debt.

- If you have no credit cards and can’t get approved for one, try a secured credit card.

This is actually preferable to getting a card with a high interest rate, annual fee, and monthly maintenance fees. Those “credit repair” credit cards often come with a lot of risk of their own. Stick with a secured card, make your payments on time, and establish a history of solid repayment.

Length of Credit History and New Credit Tips

- Don’t close out unused credit cards and limit the number of new ones opened within a short period of time.

Cancelling a credit card closes out the history on that card. So, if you had a credit card for seven years and decided to close it, those seven years of history are now gone. Because longevity is the name of the game when it comes to credit scores, yours just plummeted. Likewise, opening too much new credit has a similar affect. You have not established history, so your score is lower. Having a whole bunch of new credit and then requesting more is also a red flag to lenders.

- Manage any new accounts that you open responsibly.

You’re really going to have to stick to your budget with this. Adding new credit to the mix can sometimes feel like there’s extra money and that’s the mentality that got you in debt in the first place – for most people, anyway. If you can’t be responsible with a new account, or you feel it would be too much temptation, then you may want to forego it for awhile.

Types of Credit Used Tip

- You want a balance between revolving lines of a credit and fixed loans.

This gives your credit report a nice mix and shows lenders how you manage different types of debt.

Cleaning up your credit report isn’t going to happen overnight, so don’t expect it to. Typically, it takes about two years to rebuild a decent credit history where you’ll be approved for credit cards and loans at decent rates. Some experts recommend that when looking to get a mortgage, you should wait four years from when you started cleaning up your credit report in order to get the best rate.

There are some great tools out there to help while you’re trying to rebuild your credit, but my personal favorite is MyFico. There is a lot of helpful information and credit education that can be found on the site, but what I like best is that it provides a tool to help you gauge how your actions will help or hinder your score. You can find more information about it at www.myfico.com.

If after reading this guide, you feel like you need more help, you may want to consider a credit counseling service. There’s nothing wrong with seeking help to turn your financial life around; however, you will want to be careful. There are many companies out there who would seek to take advantage of your situation and claim they can get derogatory accounts removed from your report. Very often, the means they use to do so are illegal and unethical and can often come back to haunt you later on. It’s best to stick with reputable companies. For more information on credit counseling, be sure to visit the National Foundation for Credit Counseling or Association of Independent Consumer Credit Counseling Agencies. These companies specialize in helping consumers repair their credit reports the legal way, and can teach those in need better money management skills.

I hope you’ve found this guide helpful and best of luck as you set out to repair your credit! Let us know if you have any questions.