Free credit report: Do you need to pay for it?
Consumers have access to a variety of reports that can clue them in to their credit scores, insurance scores and insurance grades -- often for a fee. But is it worth paying for these reports?
It is important for consumers to know how they are characterized by the reports on them, but they can also overdo it. Before placing an order for such a report, consumers need to ask themselves how much they need to know and how much they are willing to spend.
While free credit scores from each of the three credit reporting agencies are already available once per year, Experian, Equifax and TransUnion suggest consumers pay more to keep an ongoing eye on their credit reports year-round.
However, shelling out the extra cash may not be necessary for most consumers. Some experts recommend staggering a free credit report orders from one of the three agencies every four months as a cost-effective way to monitor credit reports for mistakes or suspicious activity.
Although credit reports can be had for free, getting a credit score costs money. Scores can be obtained, from any of the credit reporting agencies individually, or bundled together by Fair Isaac, the originator of credit scoring, or by third parties. Prices vary greatly, so shop comparison shop. Consumers already working with mortgage brokers can ask for their brokers to provide the scores.
Generally, it is a smart move to get a credit score several months before applying for a mortgage or other sizable loan, particularly if the consumer has a rocky credit history.
Doing so will provide them with time to fix mistakes, pay off some credit card balances, and generally clean up the score before asking for money, since a higher score can save consumers lots of money on a loan.
Insurers use a consumer's insurance grade to make decision on whether to cover that person, as well as the rates they will charge. Two factors come into play: the consumer's credit score and their five-year history of claims filed on a house or car.
Claim history is found in so-called CLUE reports -- for Comprehensive Loss Underwriting Exchange. CLUE reports for auto and home, created and published by Choice Trust, can be ordered for free once a year online.
Still, consumers in the market for a home are not allowed to order the CLUE report for a house they are buying, even though the insurer may make decisions based on that home's CLUE report as opposed to their own report. In such cases, consumers should request a report from the seller.
Since these reports are related, consumers who have a good credit report (and associated credit score) with a clean claims history likely do not need to pay extra for special insurance credit reports.
Published: May 25, 2007
- Debt-free seniors may find themselves 'unscorable' – Congratulations! You've paid off your mortgage and all other debt. But you may have lost something else in the process: your credit score ...
- Average credit score climbs in Experian study – The U.S. consumer's average credit score rose 4 points in the past year, nearing pre-recession levels, according to the credit bureau Experian ...
- Fraud alerts: Your credit's first (and free) layer of security – A fraud alert notifies lenders that they should take special precautions to verify your identity before extending credit. But it comes with limitations -- and hassles ...