Federal law allows you to get a free copy of your credit report every 12 months from each credit reporting company. Also, you are allowed to review the information on all of your credit reports to make sure it is correct and up to date.Your credit report could affect your mortgage rates, credit card approvals, apartment requests, other loan requests, and even your job application. So reviewing your credit reports regularly is a smart idea. Reviewing credit reports also gives you the opportunity to watch out for and catch early signs of identity theft.
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When you make a payment on a credit card or loan, the company that gave you the loan or credit keeps a record of how much and often you pay. Those companies and other sources also report your credit, loan and payment history to one or more credit reporting companies. The credit reporting companies combine the information from your different credit, loan and payment reports into a single credit file. Three nationwide companies prepare credit files for people in the U.S.: Equifax, Experian, and TransUnion.
The Federal Trade Commission (FTC) and the Consumer Finance Protection Bureau (CFPB) say that you should be wary of companies that claim they can repair your credit. These companies are commonly called credit clinics. They don't do anything for you that you can't do on your own for free.
Should you get your credit score? A credit score is the result of a mathematical formula that uses the information in your credit file, such as how well you have paid your bills in the past, to calculate how likely you are to pay your bills in the future.
The credit scores you get from different companies may not be the same. There are a number of reasons for that:
Each company uses its own formulas for calculating credit scores. The differences in the formulas may lead to differences in your credit scores.
Companies may produce scores that give results on different scales.
Creditors or lender reports don't always report to every credit reporting company. This means that information that the credit reporting companies plug into their formulas may differ from credit reporting company to credit reporting company.
Your credit score estimates how likely you are to pay back loans or services that a lender may give you. People with higher credit scores may be more likely to pay back their debts. People with lower credit scores may be less likely to pay their debts. Lenders take bigger risks when they lend money or provide services to people with low credit scores.
Why don't free credit reports include credit scores? Your credit report and your credit score are not the same thing. Your credit report is all the information that a credit reporting company has gathered about you. Credit reporting companies calculate your credit score by plugging the information in your credit report into their exclusive credit score formula.
Federal law gives you the right to ask for a copy of your credit report from each nationwide credit reporting company every year for free. However, the law does not require the credit reporting companies to give your credit score for free.
What makes your credit score go up or down? Your credit score is based on your credit history, such as how much money you owe, how long you've owed it, how many new accounts you have, how often you miss or are late with payments, and what type of credit accounts you have. Changes in any of those factors will cause your score to go up or down.
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