Kadri & Mike Gymsplain Credit Scores & Credit Reports
On this episode of Financially Naked: Stories from The Financial Gym, our host is Kadri Augustin, Level 2 Certified Financial Trainer. He is joined by colleague Mike Poulin to talk about credit. While credit scores can seem like a mystery, there are aspects within your control. From understanding your credit score, to how to check your credit report, to making improvements, Kadri and Mike get into all the details.
Podcast Notes
Credit Score: A number between 300-850 designed to represent how reliable you will be to lending companies. It is a system of assessing potential risk for lenders.
The concept of credit scores is fairly new, born in 1989.
When it comes to credit scores, the tagline from ‘Who’s Line is it Anyway’ comes to mind, ‘Everything is made up and the points don’t matter’. This is because while there are certain aspects of credit that can be controlled, it can feel pretty random.
The aspects in your control: making payments on time, overall utilization, how many times you have applied for credit, and length of credit history.
There are three main bureaus; Experian, Equifax, and TransUnion. Creditors have to pay to report to the credit bureaus. Not all creditors report to all three of the bureaus, which is why your score may not be consistent among the three.
In general, once you reach 750, anything higher is just brownie points and bragging rights.
Credit Report: A statement detailing your credit activity, the status of credit accounts, and your overall current credit situation. The report will not have your credit score listed.
You can access your free credit reports from annualcreditreport.com. This report has the three major bureaus all in one place, and is the only place you can get a free report. Typically, they only allow this once per year per bureau, but during the COVID pandemic there was additional fraud, and so they made it free weekly, rather than annually.
The goal of reviewing your credit report is to ensure all of the activity reported is actually from you. It is also a great time to ensure there are no mistakes or missing information on the creditors’ end.
Unfortunately, errors do happen and you have to be your own biggest advocate.
If there is an alert or something you don’t recognize on the report, don’t panic. Sometimes there are errors, and you can dispute it to get it corrected.
When there is an item on your credit report that you dispute, it triggers the bureau to open a case and send a notification to the creditor. A certified letter is sent through the mail, and they have 30 days to respond. If they fail to respond, the case is automatically dropped by the bureau, meaning it falls off your credit report.
There are credit fixing companies out there that will send these letters month after month, to attempt to clear these items off the report on your behalf.
Bankruptcy is not going to ruin your credit score forever. While it does stay on your report for a while, depending on your situation, it can actually improve your score.
If you have questions about your credit score or report and want the help of a Certified Financial Trainer, check out Trainer-on-Demand, or schedule a free 20-minute consultation to learn more about working with a Financial Trainer!
Check all three of your credit reports for free at: https://www.annualcreditreport.com/