How to Take Advantage of Free Credit Reports

If you’re thinking about taking out a loan, you’ll probably want to know what loan companies know about you and your credit history. Most lenders use information about your payment record from credit reporting companies. This information isn’t necessarily a secret. It’s now easier than ever to get your credit history from these providers. You can take advantage of this access and use it to your benefit when it comes time to apply for a new loan. Here’s how:

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Obtain your latest reports

Most lenders will probably pull your most recent credit history before making a loan decision. You, too, can get recent credit reports online from each of the three major credit reporting bureaus — Equifax, Experian and TransUnion — once a year for free. Just go to AnnualCreditReport.com to request the files. You can see for yourself the strength of your credit history.

Outside of the annual requests, you can also get a free credit report from each provider if you’ve been a victim of identity theft, denied credit or faced a similar adverse situation.

Negotiate better rates

In addition to getting your credit reports, you’ll also probably want to find out what your credit scores are. These are the numbers that lenders use to evaluate you as a borrower and are based on the reports. Your scores help lenders like Camino Federal Credit Union determine how much credit they’ll offer and at what interest rate.

Most lenders use credit scores calculated based on a model from Fair Isaac Corp., known as FICO. FICO scores range from 300 to 850, and the higher the number, the better. You can learn your numbers by going to MyFico.com and paying a nominal one-time fee or by signing up for an ongoing subscription.

It’s easier to shop for the best deal if you have the advantage of knowing your credit scores beforehand. If you think your FICO numbers are low, you can take steps to improve your scores before you apply for a loan, so you don’t have to settle for higher fees. If you have relatively high scores, you’ll know that you can look for the best rates available.

Get report mistakes corrected

Another reason to obtain your credit reports is to check for errors. If you find something in the reports that shouldn’t be there, you can dispute it with the agency that lists it and have it removed, which could improve your score. Report providers are required by law to investigate disputed information.

Getting access to your credit reports and credit scores can be a good move, especially if you’re planning to meet with a lender in the near future. You could take advantage of knowing your credit history to improve your scores and possibly even get a lower interest rate, all benefits that could make your next borrowing experience a successful one.

Margarette Burnette, NerdWallet