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Hi. I have some questions about my credit and the associated report.
No problem. We at the Institute for the Painfully Obvious are happy to help you. What would you like to know?
First of all, how many credit reports do I have?
You have three credit reports.
Three? Why do I have three?
Three different companies keep track of you. Each time you bend down to pick up a quarter, huge supercomputers swing into action. Every time you put a packet of Altoids on your credit card, a tiny record is written into a huge database.
Why does it take three companies to look after my credit score?
Your credit score has great value and everyone feels better when information of such significance is carefully tracked by multiple companies. When it comes to data, "the more the merrier" is the order of the day.
What are these three companies?
The companies are Equifax, Experian and Bob's Credit Shack.
Excuse me? That's a silly name. No one would name their company Equifax.
We were just testing you. The third company is actually called TransUnion.
Where are these companies? How do I get in touch with them?
These three credit score giants are... well, they're everywhere. They have tendrils reaching into virtually every aspect of your financial existence. If you want to get in touch with them, simply skip a payment on your cell phone. They'll notice you very quickly.
How will they notice me?
If you owe money to a financial institution or a utility or a credit card company, and you fall behind, they may choose to report your sloth to one or more of the credit score companies. A tiny email goes from their computer to the credit company's computer. That email contains enough information to potentially reduce your credit score from "golden" to "tarnished."
This all sounds a little creepy. What if I just want to be left alone?
You are talking about living "off the grid." Some people don't need a credit score and they couldn't care less about what the 3 credit score companies have on them.
Yes. I want to live off the grid. I don't want a credit score.
In that case, you have two options: pay cash for everything or trade for your staples with beaver pelts like Lewis and Clark.
Lewis and Clark had a bad credit score?
No... well, actually, they had a very bad credit score by today's standards because they didn't borrow any money or open any credit cards. Somehow they overcame this fiscal handicap and had all kinds of stuff named after them,
I hate camping. How can I have a good credit score?
Simply borrow money and pay it back on time. Eventually all the credit tracking companies will decide they like you. They will give you good scores.
I don't need any money.
Of course you need money! You need a bigger house, a faster car, and there's a new flavor of Pringles coming out very soon. You need stuff.
Yes. I need stuff. I see your point. Please help me get more stuff.
That's better, Now, you need that stuff immediately. You need it yesterday. Your life is a failure unless you own stuff and you have more stuff on order.
And I borrow money to get my stuff, right?
Bingo. Borrow money to get new stuff and the credit score companies will notice you. They will focus their computers on your monthly payments. Their databases will encompass you in a digital net of financial argle bargle. You will have credit scores assigned to you.
Will all credit score three companies treat me the same way?
Unfortunately not. Your credit score is somewhat arbitrary. Each company may score you in a slightly different way. Not all lenders use all three scores when they think about loaning you money.
This is all somewhat confusing. How is my credit score calculated?
it's quite simple: if you have borrowed money and paid it back, you get a good number. Unless it's been a while since you borrowed that money.
So, I need to continually borrow money in order to be able to borrow money?
Essentially, yes. It's much more complicated than that, otherwise all that computing power would be wasted. If it was easy, there'd be a credit score company on every corner.
It sure seems as if there's a credit score company on every corner.
Yes, it does. Actually those are cell phone companies on every corner, but there are many companies that are happy to go get your free credit scores for you.
Those companies don't actually calculate my credit score?
No, those millions of web sites that offer your free credit score do not actually keep track of your scores, they just provide an interface to the three credit bureaus.
Why would I want to deal with those companies if they don't have a direct involvement with my credit score?
You don't have to deal with them. You can contact Equifax, TransUnion, and Bob's Credit Shack all by yourself. You can go on their web sites and fight through their data entry screens in order to get free credit reports from each of them.
How much are these free credit reports?
The free credit reports are actually free. Our government mandates that each credit score company provide each of us with one free report each year. We do have to ask for them,. though.
Once a year? Is that enough?
it might be enough. Of course, an identity thief could steal your personal information the day after you get your free report and buy a Winnebago that you wouldn't know about for 12 more months.
Am I at risk if I don't check my credit scores every day?
You'll have to make that decision on your own. Some companies would have you believe that.
Thanks! This has been a huge help.
No problem. Go forth and build a credit rating. If you want to.