FREE CREDIT REPORTS

Starting December 1, 2004, the entire country is being gradually phased into a system allowing you a free credit report from each of the 3 main credit reporting agencies EVERY YEAR. By September 1, 2005 everyone will be allowed access to their free credit report.

To get your reports go to this website, Free Annual Credit Report (www.annualcreditreport.com). You will need to register for the service (free) and then choose which reports you want.

You can handle this one of two ways.

1. You can get all 3 credit reports at one time or
2. You can get 1 of them, then 4 months later get the 2nd one, then get the 3rd one 4 months after that.

Don't forget these credit reports are personalized, so for married couples you can get one for each of you. That's 6 reports per year, entirely free!

Tip: During the "ordering" process you'll be given the option of signing up for extra features or monthly subscriptions to the various credit reporting agencies. These add on features are not free. It's up to you if you want those extra features but they are not required in order to get your basic credit report.

Also note: These credit reports do not give you your FICO score. That score has become a standard used by banks and other lending institutions to measure your credit worthiness. I have mixed opinions on getting this information. I do think it can be helpful, but I'm still annoyed that as consumers we are charged to get information about ourselves. It's the principal of it. I do know mine, but I was able to find out from a lender who didn't mind telling me what they'd discovered when we went through the loan process. If you are applying for a loan I would suggest that you ask your lender what your score is. You never know, you just might get a loan officer who tells you. If they refuse and you really want to know, then you can consider paying to see your score. I wouldn't get this information more than once a year, though. More than that is definitely a waste of money.

In your quest to get out of debt you'll automatically improve your credit score by paying off accounts and most importantly by paying on time. Credit reporting agencies weigh heavily how you handle your money. Paying on time is very important.  Keeping your debt under the total limit available to you is also important. If lenders see that you have 6 credit cards with a total of $15,000 available credit and you're using all $15,000, that looks much worse than if you're only using $5,000 of it. If they see that you occasionally or regularly miss payments or have late payments, that reflects very badly on your ability to pay your bills. Simply by paying on time and paying down your debt without building up more debt in the process will go a long way to improving your credit score.

Once looking at your credit report, you may be tempted to close a bunch of accounts. This can have a nasty drawback so do it carefully. If you have some really old accounts that are still open but with no balance, you're actually better off keeping those open and closing the newer accounts that you have.  It's true that you don't want too many accounts going, but the older ones being open with no balance can actually help your credit score.