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5 Things you might not know about your credit

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By Andrew Housser

March is Credit Education Month. That means now is the time to learn about your credit history and your score – and what you can do to keep it healthy.

The credit information breaches that have struck large companies in the past few years have affected millions of Americans. Even Equifax – one of the companies that monitor the nation’s private financial information – was hacked in 2017. Criminals who broke into Equifax’s systems stole login, credit card and Social Security data for 145 million people. Thieves use stolen information to break into financial accounts, apply for new credit cards in someone else’s name, or even file a fraudulent income tax return to nab a refund. Yet since the Equifax breach last September, 50 percent of U.S. adults still haven’t checked their credit report to look for falsified activity.

You can’t always stop fraudulent activity, but you can nip the activity in the bud. Even if your information remains safe and sound, it’s smart to learn about your credit. The more you know, the stronger the financial future you can build. This month, get to know these five facts about credit.

A credit report and a credit score are different. A credit score is a number between 300 and 850 that measures your creditworthiness, based on your credit history. A credit report is a list of your debts, payments and credit limits over time. To develop credit scores, credit reporting agencies use mathematical calculations that include the amount of credit you use and have available, on-time and late payments, and whether any accounts are in default (unpaid). Lenders use these scores to categorize your credit history as "poor," "fair," "good" or "excellent." A credit report does not usually include a credit score. You can, however, purchase your score for an additional fee. In addition, many banks, credit unions and credit card issuers now make credit scores available to you at no charge.

You can check your credit report without damaging your credit. Reviewing your own credit information does not impact your credit score. Everyone is entitled to a free copy of their credit report every 12 months, from each of the three major credit bureaus: Equifax, TransUnion and Experian. The simplest way to get the reports is to visit www.annualcreditreport.com. You can request all three reports at one time, or request one from each bureau at different times throughout the year. Review each report closely. If you find errors, follow the credit bureau’s instructions to correct.

You have several credit scores – and you and your spouse each have your own. Each person has three different credit scores, based on different calculations from the three credit reporting agencies. (The scores will be similar.) Your score is all your own, based on your Social Security number. Couples do not share a credit record. If you and your spouse share all of your accounts (joint accounts), your scores will be similar over time, but you still will retain separate credit reports and scores. If you divorce, you will need to open new accounts that are not shared.

You can “shop” for a loan without hurting your credit. It does not affect your credit if a prospective landlord or employer reviews your history. But when creditors evaluate a credit score before extending credit, your credit score might go down briefly. These credit inquiries are called "hard inquiries." To minimize their impact on credit scores, check into multiple auto lenders or mortgage companies within a short period of time. If a credit bureau sees several inquiries from the same type of lender within a 14-day period, it will count the inquiries as one event. Note, though, that each inquiry for a credit card affects your credit report individually.

There is no quick fix for a low credit score. Credit reports track your history over several years. Credit scores reflect how you manage credit over that time. While one mistake is not the end of the world, scores will not improve dramatically overnight. Keep in mind that the biggest impact on your credit profile is on-time bill payment. Payment history makes up 35 percent of a credit score.

If you are carrying too much debt, your credit reports and scores may suffer. Working to get out of debt could improve your access to credit, and help you get the best rates possible. If you are struggling with an unmanageable debt burden, find help to eliminate the debt and put yourself on the road to better financial management.

Andrew Housser is co-founder and CEO of Freedom Financial Network. The family of companies, providing innovative solutions that empower people to live healthier financial lives, includes Freedom Debt Relief and Bills.com. Housser holds a Master of Business Administration degree from Stanford University’s Graduate School of Business, and a Bachelor of Arts degree from Dartmouth College.
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