From Homescape

written by Amy Le on Tuesday, December 4, 11:31AM

Amy Le

When I was in college, like many broke and naive coeds, I was lured into the world of what my friends and I called “free money,” which helped pay for tuition bills and late-night study sessions at the Oasis Bar. Now as a responsible adult, the free money has manifested into high interest loans and unforgiving credit card debt.

When you’re living in a dorm with no expenses, other than your cell phone bill, which mom and dad are likely paying for, it is easy to ignore the massive pile of debt collecting on your desk.

It’s not until the first time you go to rent an apartment that you’re told by your lessor, “I’m going to run a credit report to make sure you qualify for the place.” Then you realize that maybe you should’ve paid that credit card bill last month or two ago.

Credit scores affect whether you can get credit cards, auto loans, mortgages and other kinds of credit. In most cases, higher scores mean you’re more likely to be approved and pay lower interest rates.

When your credit score isn’t so hot, you run the risk of hearing the word “no” a lot. So if you’re planning on investing in a home, buying a new car, or looking to rent, it’s always good to check your score before others begin snooping.

A credit report gives a snapshot of your credit history at a particular point in time. (Consumerismcommentary.com)

When lenders talk about “your score,” they usually mean the FICO® score developed by Fair Isaac Corporation. It’s today’s most commonly used scoring system. The method converts large amounts of difficult-to-compare data into a single point score for comparison.

The data will give lenders a forecast of how well you will repay a loan as agreed during the next 24 months. Because the score is dependant upon how you manage your credit, the numbers are always changing. This could be a good or bad thing. On the bright side, if your credit score is low, you can improve it.

Keep in mind that lenders check the credit report even after your initial preapproval of a loan. For instance, if your credit is above average, but then you decide to blow $40,000 on designer furniture before you sign the contract on your new home, you can suddenly find your loan being denied by the bank because of your recent spending spree (true story).

FICO scores range from 300 to 850, and most people score in the 600s and 700s. Lenders buy your FICO score from three national credit reporting agencies, also called credit bureaus: Equifax, Experian and TransUnion.

Checking your score

One of the best advices my father has given me in life: “Anytime you see a sign that reads ‘free,’ always ask the person posting the ad, ‘How much?’”

All those promotions you see online or on television about getting your credit report for free, aren’t as transparent as they appear. You may get a free credit report from the site, but with a stipulation that you’re signing up for a trial membership to their program. And if you don’t end the membership after the 30-day trial period, you will be billed a monthly fee.

Industry insiders recommend going to Annualcreditreport.com to pull your credit report and score. Congress recently established this site to make it easier for consumers to get their credit reports from Equifax, Experian and TransUnion.

By law, consumers are eligible for a free credit report from one of the three agencies each year. Make sure you read the credit file disclosure on the site before you proceed, so you don’t get diverted into a paying site. Prices for credit scores and reports can range from $14.95 to $44.85 on other sites.

And remember, do not let a lot of companies check your credit. Each time your credit report is pulled from an outside company, your credit score will go down slightly. Five companies pulling your credit can be the difference between that new home and renting for another year.

Have you checked your credit lately? How often do you pull your credit report?

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