So how do you get the info? You've probably seen those mildly amusing commercials for services where you can sign up for a service to keep track of your credit background and score. Paying for a credit surveillance service is one way to keep an eye on your credit profile. But these services can be expensive, so they aren't for everyone. Instead, you can start by getting your credit reports for free at www.annualcreditreport.com.
If you haven't already, go to the website above. It is not a gimmick; it is not a shady website. It is the real thing. By law, each of the three major credit agencies, Equifax, Experian, and TransUnion must provide you one free credit report per year. This provides the opportunity to periodically ensure that no one has bought a car in your name, used your Social Security number to obtain a credit card, or perpetrated any other fraud that could harm your credit. It allows you to see how your credit profile evolves.
One nice aspect of the free credit report law is that you don't have to get them all at once. For example, this week, I got my Equifax report. In December, I'll get my Experian report. Then in April, I'll get my TransUnion report. If you stagger your reports, then you can check in on your credit profile every four months, instead of only once per year.
Step #2: Know Your Credit Score
Having a spotless credit report is only a part of the battle. Most lenders also consider your credit score. Even if you never miss a payment on any of your debt, however, your credit score might not be as high as another person's score. The formula is complex. It takes into account factors like the length of your credit history, how much debt you've got, what types of credit you use, and how much new credit you've applied for -- in addition to your payment history.
Getting your new score for free can be a little bit tricky. FICO, the company that computes the credit score used by most lenders, is under no legal obligation to provide it to you for free. But it has a deal at its website myfico.com where you can sign up for a trial of its credit monitoring service for free and obtain your score. If you don't want to pay for the service, just remember to cancel it before the trial ends and you will have obtained your score for free.
Sometimes, a lender will also tell you your score when you apply for a loan. For example, when buying a car, ask the salesman what your credit score is when he checks your credit. Often, they'll be happy to tell you.
In fact, recent legislation actually requires that a lender provide your credit score if the loan terms you receive are not the best possible. I spoke to FICO Consumer Operations Manager Barry Paperno about this rule that requires lenders to provide "Risk-Base Pricing Notices," which went into effect in July. He explains that even if you only receive a slightly worse interest rate than the best that a bank offers, you must be provided your credit score along with key factors that adversely affected your score.