A lot of young professionals these days are starting to apply for loans on a variety of different things – a house, a car, school.  A lot of us are also just now finding out the importance of our credit histories.  The way we’ve used credit in the past can greatly affect our prospects in the future.  If you’ve kept your credit clean, always paid your cards down, have several accounts in good standing, and never gone into bankruptcy, you can pretty much get accepted for any loan you apply to (assuming you have steady income).  However, if you have a couple of black marks in your history, you may not be so lucky.

Whatever your particular case may be, you should make sure you’re periodically monitoring your credit report for any information that appears on it.  Not only will this help you clear up any potential mistakes, but it will also help you see if you’re in good standing or not.  That will definitely come in handy the next time you want to buy a car.

Where to get your credit report

In the United States, all of our banks, credit card companies, car lenders, and other lenders report to one of three credit monitoring companies: Experian, Equifax, and TransUnion.  Each individual lender will report information to a particular company, so in theory, each company could have differing information on you.  In practice, however, all three will generally contain similar information on your credit history.

Several years ago, the government mandated that these three companies make it easy for everyday consumers to examine their credit reports, so these they came together and created a website that lets you login for free and view your credit report.  That website, and the only one officially sanctioned by the government, is www.annualcreditreport.com.  Most other sites that claim to provide a free credit report are actually trying to get you to sign up for some sort of subscription or service, so be careful.  However, there’s an up and coming law which is going to force these companies to put a large disclaimer on their sites, so that should clear up a lot of the confusion.

Using the site

By law, each company is obligated to provide you one copy of your credit report per year.  I suggest staggering your reports, so that you’re getting one report from each company every four months.  That way, you can keep on top of your credit report throughout the year.  When you login to the site, you’ll be asked to answer some basic questions about yourself before you’re given access to your report.  In addition, you may be asked some seemingly inapplicable questions about your financial history.  For example, one of the questions that Experian asked me was to choose the lender through which I have a mortgage.  I’ve never applied for a mortgage.  They had an option for “none of the above,” which I selected.  If you have to go through questions like this, don’t worry, it’s just part of the process.

When you finally get through, you’ll see a few sections detailing your major financial history: credit cards, car loans, mortgages, etc.  Read through each of these and make sure everything looks okay.  If there’s a mistake, you’ll need to report it to the company, which you’ll be able to do on the site.  By law, that company must pass that information along to the other two credit monitoring companies, so you won’t need to worry about contacting them.

Your credit score

Even though you’re able to access your report for free, each company will try to convince you to buy your credit score from them.  This score, also known as your FICO score, is a custom-developed score that measures your credit worthiness.  Because it’s proprietary, these companies are not required to provide it to you for free.  You may want to consider buying this score, as it will be what most of your lenders use to really determine what to do with your loan application, but you can also sign up with www.creditkarma.com and get your score for free.  Any score above 700 is a good one.

That’s all there is to it.  You may want to consider saving your credit reports in a separate folder on your computer and looking at them periodically to see how you’re trending.  By continuously monitoring your report and score, you’re doing yourself a huge service in maintaining a good credit history.