Know your credit report, grasshopper

By Mir
October 24, 2006

Whether or not you plan to buy a house or a car or something else large in the near future, you should have a general idea of how your credit looks. When you sit down to refinance your mortgage is the wrong time to find out that your credit score leaves much to be desired.

There are multiple sites on the internet claiming to obtain your credit report for you for free but which ultimately charge you for the privilege. (“Oh, we did obtain the report for free. But if you want to see it, that’s gonna cost you extra!”) You are entitled to a free copy of your credit report once every year, and you should obtain it and look it over for problems or discrepancies. Online, you can use this site to query the three major credit agencies. Or you can call them directly; once a year, they have to issue you a report free of charge if you ask.

Once you have your report(s), here’s what to look for:

  • Closed accounts. Do you think you closed out an account that isn’t appearing as such on the report? Every open account weighs against your potential debt (and can lower your score), so be sure to call those companies and lean on them to report to the credit agencies that your account is closed.
  • Open accounts you no longer use. Did you sign up for a Gap credit card that one day when they were offering 20% off your purchase and then never use that card again? Just throwing the card away doesn’t mean it’s gone. Call and close the account—being sure to ask for a letter confirming that you’ve done so—then be sure to check your report next year and verify that it was reported.
  • Accounts that aren’t yours. If you are divorced, you need to be particularly vigilant about this. Credit agencies don’t care that your ex-spouse is lousy with money while you’re a financial maven if you’re being reported as still having joint credit. Even if you’re not divorced, every now and then someone has the same name as you. Or a company just plain screws up. Make sure everything on your report is really yours.
  • Late payments. Nothing will sink your credit score faster than a history of late payments. If you really did pay late, well, 40 lashes with a wet noodle for you and don’t do it again. But if you didn’t, and it’s being reported that you did? That’s a problem.
  • Collections and Public Records. This is often listed in a separate section of your report, and shouldn’t be overlooked. Again, you may think this doesn’t apply to you. Hopefully it doesn’t. But you’d better check to be certain that no one else’s mistakes are showing up on your report.

If you find a discrepancy, pursue correction. You’ll need to contact the reporting institution, typically, rather than the credit agency. Keeping your credit score healthy is important, and it needn’t be mysterious. Get your yearly reports and be proactive in keeping them accurate.

By the way, the quickest way to destroy your FICO is to pay your mortgage late. If you have a mortgage, and you have financial woes, pay the mortgage first and deal with the other bills afterwards. Also remember that just about any company to which you owe money has one main goal: Getting money from you. If they have to choose between getting nothing and getting something, they’re always going to go for something. If you’ve run into problems, don’t just stick your head in the sand. Call and ask for accommodation. Most of the time folks are willing to work out a payment plan.

If you are an anal-retentive spender and budget-handler (not that anyone around here is anything like that) and somehow manage to miss a bill at some point, be sure to call and beg for forgiveness. If you have a clean payment history the late fees and interest will probably be waived, plus you avoid having it turn up on your credit report.

You’ve got to keep that credit score high so that you can borrow money at a reasonable interest rate when you need it, for things like houses and cars, and still have money left over for things like pretty shoes. Priorities, people.


  1. I just got my report a week ago and discovered that 1.) some company that doesn’t even show up in Google and that I’ve never heard of says I have $46 in collections (???), 2.) my maiden name is spelled wrong, and 3.) it lists a place I’ve never lived as a recent former address. I’m figuring it out with the reporting agencies, but don’t assume that your report is good just because you had an awesome credit score recently (only 6 months ago, when we bought our house!). Check it as often as you can.

  2. VERY good advice. I just discovered that our old power company had listed us as having a $43 bill in collections, despite never TELLING us of this fact. (“But we sent the bill and one letter to your old address 8 months ago!” “The address we shut off power for, because we were moving out of state?” “Yes.” “Not the new address, where we live *now*?” “No.” Good times. The post office never forwarded them, and we never would have known if not for the credit report.)

    Other things I found out – it *is* possible to have a creditor amend your report if you can get them to acknowledge that there was a problem on their end, having some lines of credit open for a long time improves your score, and you can add information to your report if there’s something that needs explaining (like an erroneous collections notice, for example.)

  3. Thanks for the heads up!

  4. You can actually check you credit 3 times a year for free. I check one agency every four months. Go to the free link you have listed above, get a report from Experian in April, click back there in August and get a report from TransUnion, then in November do the same for Equifax. That way you will always be up to date on your credit.

  5. i can’t even get a credit card 🙁 and it’s not that i have bad credit..i just don’t have ANY. i used to work at Casual Corner, and i applied for a store credit card there SO I COULD BUY WORK CLOTHES, and i was turned down!! goodness. i keep meaning to hit up my bank to see about making an appointment with a financial advisor so see if i can qualify directly. sheesh. at least now that i’ve just hit the ripe ol age of 25, maybe i’ll have a foot in the door.

    in other news…Walmart has redesigned their website, and the free sample page is missing!! egads!! ;P

  6. I have been told several times by loan agents, mortgage agents and credit card companies to keep open any credit accounts that you don’t use and that have no balance. The fact that you have the credit available, but aren’t using it is a good thing in their eyes. Closing the account will actually make your score go down. They want to see that you have the credit available if for some reason you can’t pay them. My husband has an account established from when he was in the service in Alaska in the 90’s. He has tried to have it closed several times. Our mortgage company told us to leave it open because it has a $0 balance and helps keep our score up. It’s all a vicious circle, I tell you! 🙂

  7. Yeah, what jld22 said. Especially if you’re young, keeping credit cards opn is really important – it establishes a credit history. So, if the first card you got at 18 was a department store credit card (cause they give them out way more easily than the big companies), even though that store has been bought 120392893 times by other department stores and the one it is now doesn’t actually exist where you live (yes, this has happened to me) you should keep it open to maintain both the zero balance and the length of your history.

  8. Okay, given the comments I feel the need to clarify: Don’t keep a ZILLION open accounts, because that brings your score down by making it possible for you to spend a lot that you can’t afford. SOME open accounts help your score. Excessive open accounts hurt it.

  9. I was actually told the exact opposite by our mortgage broker. Some companies see you as a big risk if you have several open credit cards with zero balances. They’re afraid of you moving into this nice, new house with very little posessions… and racking up the debt on those cards to fill/fix up the house, then filing bankruptcy because you’re broke.

    FWIW, we’re 29 years old and bought our first home three weeks ago. We met with our mortgage broker about 18 months ago, and this is the advice she gave us. So, we paid off our credit cards, closed them, and actually got a MUCH better loan than we qualified for 18 months ago.

  10. Great info! Thanks.

  11. Yeah, I didn’t mean to say you needed a bunch of them, just one, and preferably one for a long time. I don’t have a house, so I have no knowledge of that at all. 🙂

  12. May I ask a follow-up question? What about services like Privacy Guard, which monitors your credit and notifies you whenever there is activity that shows up on your credit report, and lets you access it at any time, for an annual fee, and also provides identity theft insurance? I have this service and have tried to cancel it, and they always scare me into keeping it (because I am gullible and a sucker) (remember Chandler’s attempts to “quit the gym”?). Does anyone know if this is a pseudo-scam, or is actually a good idea? Thanks.

    bec 😀

  13. Eh, my feeling is that those services, while not exactly a scam, are overkill. Regular self-monitoring of your credit report and conscientious protection of your identity (not giving everyone your social security number, etc.) are sufficient for most people.

    Now that I’ve said that, someone is going to show up with an unlikely identity theft story and say how Privacy Guard saved them. 😉

  14. A year or so ago when the reports were (finally) free, I requested my credit rating(s). I am glad for this reminder to do so again. I found a Target card – never used, never officially closed is showing as a potentially negative credit. Need to check into that, as there was/is no balance. Therefore, I cannot see how leaving any type of card *hanging* and not used would be a good thing…

  15. Thanks for the reminder, Mir. This is one of those imperative things that I always say I need to do, but never quite get around to it. I’m going to follow what Paula said, and get request one three times per year. Now, how do I get my husband to do the same!

  16. The comment from Amy L.–Does this mean a husband and a wife can both request free credit reports? If so, using the logic Paula imparted (checking three times a year), could you possibly have the capability to check six times?

  17. Therese–I would think so! Your credit scores/reports are not the same even if your names are on everything together. A few years ago we bought a car together based on my credit history only; they didn’t need his. So, I say, go for all six!

    bec 😀

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