The Fair Credit Reporting Act required consumer reporting agencies, like credit bureaus, to provide their records of you at least once ever twelve months. Since your credit report, and credit score, as so important in your financial life, it makes sense that the law mandates you are able to review it annually without cost. This is why credit experts recommend that you check your credit report at least once every twelve months for errors, omissions, or other inaccuracies so that your report is an accurate reflection of you.
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There was one crucial aspect of the credit reporting system that the FCRA did not address—credit scores. When it comes to credit of any kind, whether it's a mortgage or a new cell phone, your credit score is what creditors look at.
Oftentimes, when someone pulls your report they only get your FICO credit score. My friend is a landlord and when he pulls credit he only get their score and a few stoplight metrics like payment history and age of credit lines. He doesn't get a full report.
It is only a matter of time before the credit score will be a required annual disclosure in conjunction with your credit report. Until then, the only way to see your credit score for free is to sign up for a credit monitoring service trial and canceling before the trial ends.
I won't recommend any one service, they're all pretty much the same, but I recommend one that promises to give you an official FICO credit score, not a credit bureau score. One reputable company is Fair Isaac Corporation, the originators of the FICO score, and they have a consumer facing site called myFICO (they always have plenty of myFICO promo codes flying around).
If you don't go with Fair Isaac, choose one associated with one of the credit bureaus (Equifax, Experian, TransUnion). I don't recommend signing up for these programs for no reason. If you are planning on getting a loan and are curious about how good your credit score is, then getting your official FICO score is important. It's a soft inquiry so you won't have to worry about taking a credit score hit.
If you aren't planning on getting a loan, I wouldn't worry about it. Checking your credit report annually is good enough and already more than what most people are doing. As long as your credit report is accurate, your score should be accurate. By checking your score prior to getting a loan, you give yourself a better idea of what your payments will likely be.
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It also gives you a chance to see if you're between credit score quality tiers (so you might want to wait on the loan to improve your score and pay less). Your credit report and credit scores are very important but it's more important to be smart and responsible about credit. Don't look at the score as something that defines who you are. If you have a good score, that's excellent. Keep it up. If you have a lower score, use it as motivation to be smarter about credit and track it as it improves.
Jim Wang writes about personal finance at Bargaineering.com. When he's not tackling money issues, he's usually looking forward to his next vacation and writing about it at Wanderlust Journey.
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Alex of VT 12:30PM April 05, 2013
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