Friday, January 1, 2016

Annual Credit Report - Space Them Out?

Should you run your annual credit report once a year or three times a year?

Every Christmas or New Year's, I run my annual credit reports.  Again, the correct URL for this is and not any of the sites with the word "free" in them.

A lot has changed with regards to credit reports, since I started writing this blog.   To begin with, the come-on "free" annual credit reports (that sell bogus "credit protector" schemes) have largely fallen by the wayside.   Second, the coveted credit score which was deemed intellectual property of the credit reporting agencies, is now remarkably easy to obtain, either as a "benefit" from some credit card companies, or through Credit Karma.  Credit Karma will try to sell you on shitty credit card deals, of course.  Be sure to decline all of them.

I don't obsess too much about my credit score any more.   When I needed credit the most, I certainly didn't - which is why I paid a lot of interest when I was younger.   Today, I don't need a credit score to get an apartment or job, or to borrow money, as I need none of these things.   And that is how these sort of things work - in order to borrow money, you first have to prove you don't need it.

But there are reasons to run your annual credit report, and it can be a good thing to do, as you gain some insights into your spending from it.  It can also be a good way to check to make sure there is no erroneous information on your account, or that someone has (intentionally or mistakenly) opened credit in your name.

And erroneous information can appear on reports.   I had a mortgage once that was sold to another bank, and I had just signed up for auto-pay to the account.  The payment was shuffled around between the banks, and showed up as over 30 days late on my credit report, which really kills your score and makes it hard to get a mortgage.   Fortunately, I was able to clear it up with a phone call.   Not having the report, however, meant that I had no idea this wrong information was on there.

There are three agencies, of course, Equifax, Experion, and Transunion.   Each has its own scoring system, and each has slightly different records, depending on whether your creditors reported to all three or just one or two.

The site suggests that instead of running all three reports once a year, that you space out these reports so that you check one of them every four months.   That way, you can check your credit report up to three times a year.   So, for example, you might check Transunion on January 1st, Experion on April 1st, and Equifax on August 1st.   If someone is messing with your credit, you might be more likely to know about it sooner.

It is an interesting idea.  Of course, sites like CreditKarma allow you to view your credit report anytime you want to.   The old concept of your credit report being this mysterious document about you - which you were not allowed to even see - is fading rather quickly into the night.   Even the coveted credit score is now handed out like candy.

As I have noted before, obsessing about, gaming, or trying to "repair" you credit report or score is really a waste of time.   If you want to have a good credit report and score, then don't over-borrow, pay your bills on time, and don't end up with late payments, bankruptcy, or judgments.

You might be able to "game" your score a few points here and there, but you can't bring a 650 up to 800 through these techniques.

For example, if I had kept the Sears credit card that I obtained at age 21 (instead of closing the account at age 30), my score might be a few points higher, as my "oldest credit" feature would be far longer than it is.  But leaving open lines of credit that are never used is, to me, pointless.

Companies claiming to be able to "repair" your credit are largely scams.   You can correct incorrect information on your report yourself, there is no charge for it, and you can even do it online.   On the other hand, if you have a bankruptcy, judgment, or a string of late payments, there is really no way to get this data off your report, if it is indeed accurate, until the data is at least about seven years old.

But obsessing about credit scores and credit reports usually is a sign of bad financial planning.   The number one reason people want to raise their credit score is so they can go further into debt - usually for a new car.   They've screwed up their finances through poverty-think and now want to wipe the slate clean and start all over again - and screw it up yet again.

If you get your financial house in order, your credit report will reflect this.   If you have (accurate) bad credit data on your report, the only recourse is to wait for it to fall off the report.   Seven years isn't a long time (or indeed ten) so you do get a second chance.   Sadly, most folks who are credit-score-obsessed continue to borrow, usually on onerous terms, and keep adding more bad debt data to their report, which in turn keeps them on the dark side seven years longer. 

It becomes a vicious circle - bad credit leading to bad borrowing leading to more bad credit.   It's how the poor remain poor, through poor choices.