How to Save Money With a Free Credit Report
Those who say that there’s nothing free in life are definitely wrong. A credit report, which can be obtained completely for free, can save you thousands of dollars. Here’s how.
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If you’ve ever tried applying to rent an apartment with less than perfect credit, you may have heard the unpleasant news that you were not approved.
Having a good credit score is more important now than ever. Especially as potential employers and landlords move to using your credit history as a predictor of risk.
A bad credit score can affect where you live and where you work.
It can limit your choices when it comes to what loans you qualify for. It can also end up costing you thousands over the course of your lifetime in higher interest fees.
About 10 years ago when my credit score was in the 500’s, I bought a used Mazda for about $14,000.
My credit score did not qualify me for any promotional interest rates and I couldn’t afford high monthly payments.
So I had to pay for the car over the course of 72 months and I ended up paying $20,293 for it. I paid almost $7,000 in interest!
Fast forward to two years ago when I switched my car. I bought a brand new Honda Accord that I negotiated down to $19,000.
Since my credit was now close to 800, I qualified for an introductory rate of less than 2%.
Splitting the cost into 60 monthly payments, I end up paying a total of $1,200 in interest over the life of that loan.
That’s almost a $5K savings in interest between one loan and the other!
Want to know how much interest you may pay over your lifetime?
Credit.com has developed a nifty tool to help you calculate your lifetime cost of debt. This can be adjusted to your specific situation. Give it a try here.
According to this tool, a middle aged woman with excellent credit (over 740) will pay $245,934 in interest over her lifetime.
This is for a $5,000 credit card debt, a $350,000 mortgage and a $20,000 car loan (assuming it will be replaced every 7 years).
Meanwhile, that same woman using the same assumptions will pay $270,182 in interest if her credit is only good (between 680 and 739) or $317,508 if her credit score becomes fair (between 620 and 679).
Given the impact that your credit score can have on your wallet, it’s important to know where you stand.
The first step to improving your credit score is to know what’s affecting it.
To get your free credit report you have a number of alternatives:
- You can obtain a free credit report once every 12 months from each of the credit bureaus’ websites at Experian, Equifax, and Transunion.
- Another way to check your credit is through MyFICO, ran by the company that invented the FICO® credit risk score that lenders use. It allows you to get all three credit scores at once.
- You can also pull your free credit report by going to www.AnnualCreditReport.com or by calling toll-free 1-877-322-8228. Note that this method will only get you your credit report but it will not disclose your credit score.
- You can use a reputable free credit monitoring service such as CreditKarma, where you can get your free credit scores from TransUnion and Equifax at once, or Credit.com, where you can get your Experian score and report.
Once you have your free credit report, you can begin looking at what items are negatively impacting your credit score, and potentially costing you money.
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5 Quick DIY Credit Repair Tips
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What should you watch out for?
Once you have your credit report in hand, it’s time to check it carefully. Watch out for the following things that could affect your credit:
Incorrect Information
Many consumers find incorrect information reported on their credit report.
Ranging from incorrect names or addresses to accounts that don’t belong to you, by examining your free credit report you’ll not only be able to correct errors that may delay lending processes down the road, but you’ll also be able to spot any fraudulent activity.
Missed or Late Payments
Late payments, or payments that were missed altogether are a major factor that negatively impacts your credit score.
If you spot any of these on your credit report, make sure that they are being reported correctly. If they’re not, you have the option to dispute them.
With just one or two that get removed from your report, your credit score can increase significantly in a short period of time.
Maxed Out Accounts
If your free credit report shows that some of your accounts are close to their limit, you may want to focus on reducing those balances first.
This factor alone can be responsible for up to 30% of your total credit score.
Although these are some of the factors that can have the most impact on your credit score, each situation is unique.
Whether you use the credit bureaus or a credit monitoring site to pull your credit report, read carefully.
Take advantage of any insights they may provide as to which items are negatively impacting your credit.
This will give you a clear idea of what you should focus on to improve your credit score.
Lastly, remember to stay up to date with your credit report.
Bonus Tip
If your situation requires extreme intervention, try working with the specialists.
The Credit Assistance Network helps you improve your credit through a multi-step process and a methodical approach. They have been effectively helping Americans improve their credit for over 15 years. Get started with the Credit Assistance Network today!
By continuously working to clean up any negative items that may pop up, your free credit report will provide you with a road map to ensure you pay the least possible amount of interest over your lifetime.
Want to learn more about what impacts your credit score? Sign up here to receive my free Quick Start Guide to Improving Your Credit Score.
Do you have a credit improvement success story? Share it in the comments section!
