Your credit score is the number that chronicles your past financial behavior as well as how you currently stack up against other consumers, economically and statistically speaking. Banks, insurance companies, and other parties including landlords and employers, use your FICO score to evaluate credit risk – meaning the probability that you would not pay back your loans, or that you would not be able to afford your rent, and insurance premiums, among other things. When it comes to credit reporting, you certainly would hear a lot about FICO score, but that's just one type of credit score. Other benchmarks include VantageScore, CE Score, and Transrisk. You don't need to pay for your credit score if you understand what the law says and take specific action each time you get adverse correspondence about an application from a landlord, employer, lender, or insurer.
The Law Is on Your Side
There's no need to pay a few bucks a month to access your credit score because the law is on your side. If you are a U.S. citizen or lawful permanent resident, you can receive a free copy of your credit file once a year. Write to the three credit bureaus – Experian, TransUnion, and Equifax – and specify that you are requesting your free credit file pursuant to The Fair Credit Reporting Act (FCRA). If after 30 days, you don't get any response, follow up by contacting the credit bureaus' respective customer service departments.
Remember, you don't have to justify why you want the credit report; you simply need to write that you want it in accordance with the law. If after 60 days and multiple back-and-forths, the credit agencies don't send you the personal file, contact the Federal Trade Commission and file a complaint either via phone at 1-877-FTC-HELP (1-877-382-4357) or online at ftc.gov/complaint. You also can lodge a grievance with your state's Department of Financial Services or the local Better Business Bureau.
You Have the Right to Know Who Accesses Your Credit File
The law says that you have the right to know who accesses your credit reports as well how that review has affected, or will affect, you. The FCRA allows a hodgepodge of institutions and individuals to review your credit data. These include lenders, employers, landlords, and insurers along with other businesses that need your credit data to evaluate your application for employment, credit, tenancy, and insurance – think organizations specializing in background checks.
Note, however, that your existing employer cannot delve into your credit file without your consent. The takeaway here is that no one can access your credit information without your approval. For example, when you apply for a loan, one of the disclosures the underwriter would make is that you agree that the lender would make its financial decision based on all types of information, including data in your credit file.
Your Credit Score Changes – All the Time
John V., a retired business executive living in Purchase, N.Y., has had a perfect credit score for years, but never bothered checking it, or paying for it, on a monthly basis. He says it's not worth paying for your credit report every month because the information changes all the time and credit bureaus often are late in updating data they receive from financial institutions. Your credit data fluctuates thanks to a miscellany of actions, from you and others, such as payments, balance transfers and new loans along with new-debt applications, address changes, and employment updates.
Don't fall for those offers that tout complete peace of mind if you pay, say, $15 or $20 a month to have a permanent access to your credit file.
(Always) Get Your Credit Score For Free
You actually could be paying zilch – yes, nothing – whenever you access your credit file. Besides the FCRA mandate, you can receive an additional free credit report if you live in Vermont, Colorado, Maine, Maryland, Georgia, Massachusetts, or New Jersey.
You're also entitled to a free credit report if you get turned down for credit, insurance or a rental opportunity. The lender, insurance company, or landlord will send you a letter explaining the basis of the rejection as well as your rights and responsibilities when it comes to credit reporting.
Send that letter to all three credit bureaus and write a little note indicating your request of a free credit report. John V., the N.Y. retired executive, says it's important to manage your "reserve" of free credit reports each year. For example, he recommends that you don't request all three FCRA-approved credit reports at the same time – but rather suggests that you request one every four months. Other finance people contend that it's better to get all three reports at once, so you can compare things like credit data and score, among others.
By becoming familiar with the way credit reporting and scoring work, you would never have to pay for your credit score – a savings that can add up to $200 a month. You are entitled to a personal, free credit file whenever you get denied employment, insurance or credit, depending on information contained in your credit report. Remember, the law not only is on your side from the get-go, it also allows you to file a complaint with the FTC or your state's Department of Financial Services if credit agencies don't respond to your request within a reasonable period – say, 30 to 45 days.