Tax Day!

April 15th is a convenient annual reminder to keep tabs on your financial future. So, if you are not one of the countless individuals frantically clicking through -Tax software of choice- today, then perhaps you could use Tax Day to remember to do something else that's very important.... pulling your credit report.

Each of the three credit bureaus are required by law to give you a free credit report once a year. All three are quickly and easily accessible via AnnualCreditReport.com. The three reporting agencies are TransUnion, Equifax and Experian.

A credit report is a detailed history of an individuals responsibility in repayment of debts. This information is used to by lenders to determine your creditworthiness or predict the likelihood of future delinquency and determines how much you can borrow and at what percentage rate. A credit report/score may also be used in non-traditional ways such as a potential employer finding out how responsible you are, or if you might be in a financial hole and thus, likely to commit theft or fraud. 

Debts are classified as either revolving debt, installment debt or open debt. Reported data includes bank loans, mortgages, credit cards, collection agencies and utility companies. Installment debts are typically fixed payments for a fixed period of time, such as a mortgage. A credit card is an example of a revolving debt. Open debts must be paid in full each month, such as your electric bill.

Along with your payment history on each account, your report will contain information such as; how old each account is (older open accounts in good standing are positive), account diversity (having different types of debt in good standing shows that you have the ability to manage them well), and credit inquiries (who's been taking a peek at your files). 

You will need to look for suspicious accounts and suspicious inquiries. In keeping check with your report, YOU become the biggest factor in finding and stopping identity theft.  

Each report may have slightly varying information, so I usually pull all three and compare them to each other for accuracy. You do not HAVE to pull all three at the same time though. You can choose to spread the three out and pull one every 4 months. This tactic may be helpful if you know you may be in the process of buying a new home or vehicle or may need to take a personal loan, later on in the year. 

Please remember that a credit report is not the same as a credit score. Your credit score is based on the detailed history contained in your report. Lending agencies will not have access to your full report so they determine your creditworthiness using your score. There are many models to create a credit score, but all will give you a general idea of where you stand. During the process on AnnualCreditReport.com, you will have the option to purchase your credit score from each bureau (usually $7-8 each). This is not something you HAVE to do. For those of you that have a credit card, many of the credit card companies now offer this as a free service from one of the reporting bureaus or your FICO score. CreditKarma.com is a FREE service that provides your score by Equifax and TransUnion. Either option can be accessed at any time online. Credit Karmas score updates every 7 days. A score offered through a credit card is likely updated once a month. 

Again, both AnnualCreditReport.com and CreditKarma.com are free and VERY easy to use. 

In addition, Quizzle.com offers a free Equifax report every six months. Credit Sesame is a freemium site that offers your Experian score, is updated monthly, and recently started providing users with up to free identity theft insurance up to $50,000 (covers expenses incurred in restoring your identity, not expenses that result from the identity being stolen). I have not used either of these services yet, so I can not attest to their ease of use. 

Lastly, don't be discouraged if you find your report and score to be in the "very poor" or "poor" categories. Repairing a credit report is not a quick process (closed or negative accounts may remain on your report as much as 10 years or more), but it does not take much effort to learn ways to improve it. You've already taken the first step in repairing it by simply inquiring.