First things first

In this post I will share some of the elements of the foundation to my better understanding of finances. In the first post I mentioned I needed discipline as well as knowledge in order to improve my credit score. The first step in becoming knowledgeable is what I will share with you today. Initially, I had a basic understanding of what a credit score was and what it measured, but I chose to do otherwise before I found myself needing credit.

First let's define a credit report and score. While submitting applications for a job, housing, and financing, an inquiry will be submitted to find out how creditworthy is this individual. The job may want to see if you are good at managing your finances which some consider a good indicator of the likelihood of you being a liability on the job. The residence/realty company may want to determine if you have a history of paying or not paying your rent. The prospective creditor wants to know the likelihood of them getting their money back if they decide to loan to you. With the exception of the use for employment I would say that is a fair amount of information to want to know about someone who wants money and understand the idea behind a credit report and inquiry. In order to get this information, an inquiry is submitted to a credit bureau or third party. The major credit bureaus are Experian©, Equifax©, and Transunion©. They have a record of all of your reported credit transactions (requests for credit which are hard inquiries, payment history, credit details including balances on accounts, contact information for creditors, legal action against you including judgements and liens, etc) which becomes the credit report. All of this information is weighed differently and will generate a score based on the information that is provided and the greater the score the more creditworthy you are considered. Not all of the scores that are generated will be the same and there are third parties outside of the credit bureaus who also generate scores for you. One of the most famous is the FICO© (Fair Issacs Co.) score.

The first thing is to know what is your current credit score, and this can be found out by using a free credit score service. The one I like most is Credit Karma© (I have no affiliation with this company) but there are others that are available such as Credit Sesame©. Credit Karma© now offers two scores and access to two reports from the three credit bureaus. You are able to access both your Transunion© and Equifax© scores and reports through Credit Karma©. Credit Karma© is also free which makes it even better. It is not saying that the score provided to you will match what a creditor may see, but instead it is meant to be a tool to help you make better decisions and planned actions. At least that is how I use it. If you are not comfortable with sites such as Credit Karma© or Credit Sesame©, you can get your report directly from https://www.annualcreditreport.com/ . This will allow you access to all three reports once a year. Now things change on your credit report rather quickly so monitoring it on a yearly basis may not be as beneficial as Credit Karma© or Credit Sesame©, but it is still another tool.

Once you have this information it is time to see what factors are causing the greatest impact. There can be large balances which are lowering your overall credit score, you may have late payments, you may not have enough accounts, your credit file may be too thin, there may be accounts in collections, or there may be some errors which need correcting. All of the aforementioned things are present on people's credit reports and can be "corrected". This is another topic which I will share with you all a little later. Once you have access to the information, you need to review the information and find out what is listed on it, what needs to be corrected, what habits you need to change, and what will your next steps need to be. Just having the information and reviewing it is an important first step in order to plan your future steps and change of habits.

With that being said, please, please, please, find a legitimate free resource which will give you access to your credit reports and scores in order to get your snapshot of your credit history. Once you have this information devote sometime to go over it and plan accordingly. Good luck and happy money!!!

Feel free to send question, suggestions, and responses to toni@mrsfunnymoneyblog.com.