Know your credit report, and what it means

Forget those goofy commercials. You can get your credit report (really) for free from the federal government. When you get it, it’s important to make sure that the information on your credit report is accurate and represents a good picture of your financial history.

Elaine Thompson/AP/File
In this 2009 file photo, a customer swipes a MasterCard credit card through a machine while checking-out at a shop in Seattle. According to Hamm, checking your free federal credit report a few times a year is a good habit to adopt, even if it's just for peace of mind.

First and foremost, ignore those ads from and and the like. Ignore them. All they do is require you to sign up for a service you don’t want in order to get something that you can already get for free through the federal government.

The federal government’s real site for getting your credit report is It doesn’t require signing up for any program or paying any fees. Instead, it just lets you get a free copy of your credit report every year from each of the three major credit reporting agencies (Equifax, Transunion, and Experian).

The other sites will give you those reports as well, but they also require you to sign up for an additional credit monitoring service. Sure, you can get out of that service if you want, but there’s no reason to go through the hassle at all.

With that out of the way, let’s look at the question of what your credit report is and why you should care.

A credit report is a summary of a person’s (or company’s) history of borrowing and repaying money, generally covering the last seven years. Pretty much any business that lends you money will report this information to the major credit reporting agencies, along with updates as to whether you’re repaying those loans or not. This can even extend to other monthly bills, though the reporting of those is at the discretion of that utility company.

When someone wants to find out if you’re reliable – say, when you’re trying to get a home loan or trying to get a job – they can gain access to your credit report and use it to evaluate your reliability and trustworthiness. Have you been repaying your debts? They’ll know, for the most part.

Lots of businesses and organizations use credit reports to evaluate customers and potential employees. They make decisions such as the insurance rate to offer you and whether to offer you a job based (in part) on what they learn from your credit report.

The three credit reporting agencies are not perfect. It’s in their business interest to make sure that their reports are as accurate as they can be, but people report incorrect information sometimes and sometimes the wrong information ends up on reports. There’s also the issue of identity theft, where someone takes your information and does potentially nefarious things with it.

Thus, it’s important to make sure that the information on your credit report is accurate and represents a good picture of your financial history.

You’re allowed to get one free copy of your credit report from each credit reporting agency each calendar year. Thus, it’s a good idea to get one credit report every four months or so on a rotating basis. For example, you might get a report from Experian in May, one from Equifax in September, and one from TransUnion in January. This is something well worth adding to your calendar so you remember to do it.

A credit report is fairly easy to understand. It lists all of your creditors – the people you owe money to – and whether you’re up to date on your payments with them. It will include any creditors you’ve dealt with in the last seven years.

If you find something incorrect, be sure to let the credit reporting agency know about it. They have guidelines for handling incorrect information or potential identity theft.

Be proactive. Check your credit report. You’ll be glad you did, even if it’s just for peace of mind.

This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere. Images courtesy of Brittany Lynne Photography, the proprietor of which is my “photography intern” for this project.

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