Monitoring your credit report and score: What to know

Investigations

If you have a credit card or have ever taken out a loan, then your credit history is part of a credit report. Do you know what’s in that credit report or how often you should check it?

You’ve probably heard about your credit report when applying for a job. In this digital age, everyone should understand the contents and information included in their credit report. It’s one of the most important documents of your financial life.

RELATED: 5 small mistakes that can hurt your credit score

When you purchase a home and take out a mortgage to pay for it, your lender is going to check your credit report. The same thing is true when taking out a car loan. Whether used or new, your credit report will be closely scrutinized. 

“Your past history is a prediction of what you might do in the future,” said Dr. Ann Berry.

Berry is a consumer economics specialist at the University of Tennessee. She says the information on your credit report can affect much of your life — the job you get, the home you live, how much money you can borrow and how much interest you’ll pay.

“Who you owe, how you paid them, if you are delinquent on your payments and it goes back for several years,” she said.

The information on your credit report includes how much debt you’ve accumulated, whether you pay your bills on time, where you live and work, whether you’ve had a vehicle repossessed, if you have filed bankruptcy, or had a lawsuit judgment entered against you.

“We are eligible for one free credit report a year from each of the three major credit reporting agencies.  They are Experian, Equifax and TransUnion,” Berry said.

The Federal Trade Commission did a study a few years ago and found that about one in four people identified potential errors that might affect their credit on one of their credit reports. That is an important reason why you need to check your report yearly. Berry suggests that you stagger your requests for those free credit reports.

“Get one from Equifax in January. Wait four months, then get TransUnion. Then the next three months get Experian,” Berry explained.

Those reports, though, do not include your credit score.

“Your credit score is made up of all the things that are in your credit report. The biggest one is how you pay your bills,” Berry said.

Credit scores range from 300 to 900. You’ll need a credit score of 660 to buy a new or used car at a good interest rate. A housing loan from the Tennessee Housing Development Authority requires a score of 660 as the minimum.

“Your score is used by the lender to give you the rate, the percentage rate, terms of the loan, or whether they will give you the loan or not. Because if it’s too low, you are a big risk and they don’t want to do that,” Berry said.

Here are the average car loan rates by credit score. Prime Rate: 661 to 780. Nonprime: 601 to 660. Subprime: 501 to 600. Deep Subprime: 300 to 500. Receiving your credit score will cost about $15 or $16.

“If you’re not going to be buying anything, you don’t need to know your score, but you need to know what is in your report,” Berry said.

Reviewing your credit report at least once a year and checking for potential errors can ensure it stays protected year-round. This way, if you apply for a loan, you won’t have to scramble at the last minute to dispute errors.

If you have poor credit, reviewing your credit report can help you figure out how to rebuild it instead of guessing at the problem.

Good credit could potentially save you thousands of dollars in interest payments over the course of your life.

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