Credit Score

5 Easy Personal Finance Wins for the New Year

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7 minute read

“If you haven’t started, then taking action is more important than finding the best strategy. If you’re already taking action, then ensuring you’re working on the right thing is more important than working harder.” – James Clear, Atomic Habits
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What’s a credit score and why do I care?

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< 1 minute read

What is a credit score and why do I care about it?

A credit score is a reflection of your personal credit history. It is a measure that lenders use to determine the likelihood that you will pay back your loan and is part of the information that they use to determine whether to give you a loan. A credit score is not the same thing as a credit report.

The picture shows that FICO credit scores range from 350 to 850 (850 being a low risk to the lender) and how a lender may view these scores. Your individual credit score may be a different number from each of the credit bureaus (Equifax, Experian, TransUnion) because they each have different evaluation criteria.

It’s important to know your credit score because lenders use it when evaluating whether to give you a loan. If you want to purchase a house or a car using a loan and you have a low credit score, then lenders may give you a loan with a high interest rate in an attempt to hedge the risk that you will not repay your loan.

What’s a Credit Freeze?

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< 1 minute read

Alright, so the picture isn’t exactly it.

A credit freeze allows you to block access to your credit report. This can be a useful tool as many lenders may not extend a line of credit in your name if they’re not able to access your credit report which can help to make sure that someone doesn’t fraudulently open a line of credit using your information.

Credit freezes can be placed by creating accounts with each of the major credit reporting bureaus (Equifax, Experian, TransUnion) or by calling the bureaus. When you place a credit freeze you will receive a PIN or password that you will need to keep in a safe place. You will use this PIN or password if you need to temporarily lift the credit freeze. There may be a small fee for placing and lifting a credit freeze.

If you’re planning on doing something which requires your credit report to be pulled (taking out a loan, applying for a credit card, sometimes applying for a job if the employer pulls a report, etc.), then you have to make sure to temporarily lift your credit freeze.

When was the last time you pulled your credit report?

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< 1 minute read

Your credit report details your credit history and any lines of credit (student loan, mortgage, vehicle loan, credit card, etc.) that have been opened in your name. Lenders use these reports in their processes to determine if you are worthy to be approved for the loan that you’re applying for and what interest rate to offer you.

With the data hacks that took place or were disclosed in 2017 (most notably Equifax and Yahoo!) it is becoming more and more important to ensure that your identity hasn’t been stolen and that someone hasn’t opened a line of credit in your name.

How do you do this?

You are entitled to one free credit report from each of the 3 major credit reporting bureaus (Equifax, Experian, TransUnion) once per year via annualcreditreport.com. You can pull your credit report from the website and check for any discrepancies.

Drew’s Method:

I pull my credit report in January, May, and September. Each time I pull the report I pull from a different credit bureau. Eg. January pull from Equifax, May pull from Experian, September pull from TransUnion. This way, I’m able to check my report throughout the year and never have to pay for it.

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