Your Money_ The Missing Manual - J. D. Roth [80]
To get your report, you'll need to provide some basic info, including your Social Security number. You may also need to answer some questions about your current accounts, like how much your monthly mortgage payment is.
When you pull your credit report, don't be overwhelmed—it's not as scary as it looks. First, check your basic info (address, birthday, and so on) to be sure it's correct. Next, look at each of the credit accounts listed in the report to be sure they match your records. Finally, check the inquiries (listed under "requests for credit history") to be sure nothing fishy is going on such as credit checks from banks in eastern Europe. These could be signs that somebody's managed to swipe your credit card info.
Note
AnnualCreditReport.com lets you see your credit report, not your credit score—there's a difference (see Getting a Free Credit Report).
If everything looks good, shred your report or file it someplace safe. If you spot errors, take the time to clean things up. The Federal Trade Commission publishes a 6-page guide to disputing credit report errors (http://tinyurl.com/FTC-corrections), but all you really need to do is:
Notify the creditor. Contact the company that reported the incorrect info in your credit report. In writing, explain why you think they're wrong. Provide copies of any paperwork you have to prove your case. Most companies (especially credit card issuers) have a specific phone number and/or address you can use to file these kinds of disputes.
Notify the credit agency. Contact the credit bureau in writing and explain what you think is wrong (the FTC guide mentioned above includes a sample letter). Again, if you have documentation to support your case, include it; send copies, not originals.
Be sure to write down the name and employee ID of anyone you deal with. This may seem excessive, but it could save your bacon down the road.
Tip
Here's a step-by-step guide to getting your free credit report: http://tinyurl.com/GRS-crguide.
Your Credit Score
While your credit report collects all sorts of info about your debt history, your credit score is a single number that summarizes all that data.
Credit scoring has been around for decades in various forms, but only became widely used during the 1980s when a firm called Fair Isaac (now known as FICO) developed a new type of credit score, called a FICO score. The mortgage industry adopted FICO scores in the mid-1990s, and now lots of other industries use them, too.
A FICO score takes bits from your personal credit report and compares them to similar data from millions of other people. FICO (the company) uses complex secret formulas to crunch all this info into a single number, which can range from 300 to 850. This number gives lenders a good idea of how likely you are to pay them back, and they use it to decide how much to lend you, what interest rates to charge, and what terms to set.
Note
Though the FICO score is the most widely used credit score, it's not the only one out there. Other companies provide competing scores, and FICO (the company) offers a variety of other, specialized scores that measure things like how likely you are to declare bankruptcy, close an account, and so on. You can read more about your "secret" credit scores at MSN Money: http://tinyurl.com/secret-scores.
"A bad or even mediocre credit score can easily cost you tens of thousands and even hundreds of thousands of dollars in your lifetime," Liz Pulliam Weston writes in Your Credit Score (FT Press, 2009), which is full of info about how credit scores work. "You don't even have to have tons of credit problems to pay a price. Sometimes all it takes is a single missed payment to knock more than 100 points off your credit score and put you in a lender's high-risk category."
A high credit score will get you the best interest rates on credit cards