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A life you love on a budget you can afford.

Here on TBM®, I provide you with simple, easy-to-follow solutions to help you budget your money, pay off debt, save more, and crush your financial goals. But more than that, I give you the tools to start doing the things that matter most to you, on a budget that actually works!

Your Credit Report & Score – The Ultimate Beginner’s Guide

June 27, 2016
Credit Report & Score

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Monitoring your credit is one of the most important things you can do when it comes to your financial health. It’s also important to know the difference between your credit score and report. Click to read about the differences and discover the free resource I use every day to monitor my credit score. Find out how I get a personalized step-by-step action plan from credit experts and alert monitoring for absolutely FREE.

Monitoring your credit is one of the most important things you can do when it comes to your financial health. If you have read my recent posts then you know that you can get your credit report for FREE by going to AnnualCreditReport.com. Every year you are allowed one free credit report from all 3 of the major credit reporting agencies: Equifax, Experian, and Transunion. That's 3 chances for you to check over the information in your report to make sure the information is correct. This also gives you the chance to eliminate things on your report that could be causing negative marks.

Checking your credit report is important, but it's also important that you monitor your actual credit score as well. There is a distinct difference between your report and score and if you are not aware of this difference it can have a negative effect on your finances. Not only are your credit score and report different, they might be used for different purposes as well. So today, I wanted to tell you about the important differences and give you some pretty amazing tools to help you monitor your credit score for FREE.

  • Read: 3 Smart Ways to Improve Your Credit Score Quickly

Your Credit Report

Your credit report has information that details your credit history. Your report also includes things that are not used for credit score purposes such as your address (past & present), your social security number, date of birth, and employment information. This information is strictly for identification purposes only. Your report also contains the following information:

  • Types of credit you have (auto loan, mortgage loan, student loan, credit card, etc…)
  • Balances and limits of credit accounts (tradelines)
  • The date you opened the loans or lines of credit
  • Account history (whether you have paid your bills on time)
  • Collections
  • New credit you have opened recently
  • Public records (judgments, bankruptcy, or tax liens)

If you have ever looked at your credit report you will know that the one thing most people are interested in is not listed on the report and that is your actual credit score.

  • Read: 9 Ways to Repair Your Credit Score After Bankruptcy

Monitoring your credit is one of the most important things you can do when it comes to your financial health. It’s also important to know the difference between your credit score and report. Click to read about the differences and discover the free resource I use every day to monitor my credit score. Find out how I get a personalized step-by-step action plan from credit experts and alert monitoring for absolutely FREE.

Your Credit Score

Your credit score is an actual numeric value that is generated from information on your credit report. There are a number of complex formulas for generating your credit score but FICO is probably the most well-known. Your credit score is used by potential lenders to determine how big of a financial risk you are. FICO scores ranch from 300 to 850 and a higher score tells lenders that you are not likely to default on your loans or miss payments. Certain information in your credit report is weighed more heavily than others when it comes to determining your FICO score. Here is how FICO breaks down information in your credit report:

  • Payment History = 35%
  • Amounts Owed = 30%
  • Length of Credit History = 15%
  • New Credit = 10%
  • Credit Mix (a mix of different account types is good) = 10%

Depending on your credit situation, the importance of these categories might be different. For example: if you don't have a lot of credit history your amounts owed might not be as important as someone who has had a lengthy credit history.

Most of the time, getting a glimpse of your credit score costs money. For Experian, your credit score is a completely separate service and they will charge you a nominal fee to get it. When it comes to the financial impact of your credit, your credit score is probably the most important factor. When you apply for a loan, the lender probably has a predetermined number range to use when determining your loan terms. Every time they pull your credit score this generates a hard inquiry which does lower your credit score. They do this so they can quickly glance and determine your credit risk.

There are times when your credit report will be pulled as well. For example: when you apply for a new job, your new employer might pull your credit report (with your permission) to get a glimpse of how you handle your finances. If your report shows good financial history then they can assume you will also be responsible for the job.

  • Read: Balance Transfers: How I Paid Off $7,500 In Credit Card Debt

 Get an Estimate of Your Credit Score for FREE

Now that you know the difference between your credit score and report, it's important that you monitor both. Getting a free copy of credit report is easy but what about your actual score? There are some companies that do provide a FREE estimate of your credit score. The reason I say “estimate” is because the score they provide might be slightly different from the score a lender will actually see. With that being said, the score these companies provide are still beneficial and in my experience are pretty accurate.

I have used Credit Karma for over 7 years and it played a big role when I purchased my car last month. Since I had a good idea of my credit score was before I purchased my car, I was able to determine what special offers I would apply for through the car dealership. My Credit Karma score was 780 when I looked at it the day I bought my car and when the lender ran my credit they had it listed at 796. To me, that is pretty accurate. Here are three companies I have used to monitor my credit score for FREE.

Credit Karma

Credit Karma was founded in 2007. I have been using Credit Karma since 2011 and it has been a vital resource for my financial decisions. With Credit Karma, they literally break down your credit report, show you important factors that are impacting your score and then give you free resources and tools to address those factors. Not only do they provide you with your FREE credit score, they also have some other amazing features as well.

  • Text alerts to let you know if and when there is a new inquiry. This is awesome because it helps battle identity theft. If you get an alert that a new account from Bank of America was added to your report but you did not open an account at Bank of America, this allows you to address the issue quickly. Having this feature gives me peace of mind that I know exactly what and when something on my credit report has changed.
  • The My Spending tool is also helpful. This free tool allows you to see all of your spending in one place. It helps you identify your spending habits so you can see where you are now so you can get where you want to be.
  • CreditKarma gives you a FREE credit score that is based on TransUnion data.

You can see all of Credit Karma's amazing FREE tools here.

  • Read: Want a Rewards Credit Card? Here's What to Look For

Monitoring your credit is one of the most important things you can do when it comes to your financial health. It’s also important to know the difference between your credit score and report. Click to read about the differences and discover the free resource I use every day to monitor my credit score. Find out how I get a personalized step-by-step action plan from credit experts and alert monitoring for absolutely FREE.

Additional Resources

Credit Karma is not the only place you can check and monitor your credit score. Here are some additional resources for you to check out.

Credit.com: Credit.com not only gives you a free credit score but it also provides free expert advice. You get a personalized step-by-step action plan for your credit situation and advice on where to focus and what to do to improve your score. Credit.com gives a score based on the data in your Experian credit report. They give you two scores  – the National Equivalency Score and VantageScore 3.0.

Use these FREE resources to monitor and maximize your credit report to your advantage and get the best financial options available.

Monitoring your credit is one of the most important things you can do when it comes to your financial health. It’s also important to know the difference between your credit score and report. Click to read about the differences and discover the free resource I use every day to monitor my credit score. Find out how I get a personalized step-by-step action plan from credit experts and alert monitoring for absolutely FREE.

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Filed Under: Tagged With: CREDIT CARDS, CREDIT SCORE, DEBT

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Comments

  1. Justina Gholston says

    June 27, 2016 at 6:24 pm

    Lots of great info here. I’ve been working to increase my credit score for the last few months. Since I’ve been paying off debt it’s been climbing up every month.

    • kumiko Ehrmantraut says

      June 28, 2016 at 9:58 am

      Getting your debt-to-income ratio down is a huge win for your credit score. Thanks for sharing Justina!

  2. Melissa says

    June 27, 2016 at 7:31 pm

    I love Credit Karma! It’s surprising how easy it is to get info about your credit score if you know where to look, but I seriously love Credit Karma because it gives you your actual score. Thanks for the round up!

    • kumiko Ehrmantraut says

      June 28, 2016 at 10:01 am

      Thanks Melissa!

    • Ben Waple says

      October 27, 2016 at 7:22 am

      Thank you for this very informative article. A lot of good points to take into consideration.

Hello, I'm Kumiko, but everyone just calls me Miko. Welcome to my blog, The Budget Mom. I am an Accredited Financial Counselor® , and mom to a rambunctious boy. Come along with me as I strive to live a life I love on a budget that I can afford. Read more about me.

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The Budget Mom

The Budget Mom
Back on March 1st, I did an Instagram Live all about closing out your budget.

This step and my "Where Did My Money Go?" Worksheets are the two things I get the MOST questions about.

What do you do with your budget after the month is over, and you’re ready to begin a new month? Most people don’t realize it, but your spending throughout the month gives you some incredibly helpful information.

One of the first steps to creating and sticking to a realistic budget is tracking your expenses. Your spending is the underlying foundation for creating a budget and ensuring that your budgets in the future are successful.

If you are not aware of where your money is going, you can’t make the best decisions for your dollars.

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Kumiko Love is a single mom who empowers women everywhere to regain control of their financial lives. An Accredited Financial Counselor with over nine years of experience in the finance industry, she founded The Budget Mom, a community of millions of women on a path to financial fulfillment.

She's also the creator of the wildly popular Live Rich Planner® and Budget by Paycheck® Workbook. Love has been featured on Good Morning America, the Today show, CNN, CBS, ABC and in USA Today, US News, World Report, Huffington Post, Money Magazine, Parents Magazine, the Washington Post, and Real Simple. She lives in Spokane Valley, Washington.

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