Checking your credit report may seem about as exciting as flossing your teeth, but it's essential to your financial health. The information it contains can affect everything from your employability to your insurability. That information also is used to create your credit score, which affects your access to credit and the interest rates you'll pay.

The Federal Trade Commission has found that more than one in four reports contains errors, so it's important to check your report for accuracy. Here's how to access your report (or reports — three are available to you) and what to look for.

Where to get your free credit reports is the place to go. Don't go to because, ironically, you'll find that your report is not free! That site is run by one of the three main credit bureaus, and it wants to sell you its credit monitoring service. Oh, you'll be offered a "free" credit report for signing up, but it will require your credit card info, and if you don't cancel the monitoring service within seven days, you'll be charged $19.99 per month.

At, you'll be able to request a truly free report from each of the three bureaus: Experian, TransUnion, and Equifax. By law, you are entitled to one free report from each bureau once a year.

If you're married, both of you should request your reports. Since credit information is tied to a Social Security number, there's no such thing as a joint credit report or score.

SMI has recommended requesting reports one at a time every four months as a way to monitor your credit file on an ongoing basis. We still think that's a good "maintenance" approach for those who have already cleaned up their credit files and aren't planning on applying for a major loan in the near future (such as a new mortgage). On the other hand, if you're planning a purchase soon that will involve a loan, it's best to ask for all three at once. That way you can scan all of the reports for errors and get any needed corrections made before applying for the loan. Each bureau works independently, so just because you don't see any issues in one report doesn't mean there aren't issues lurking in the other two.

(One of the more maddening aspects of credit reports is that while your reports are free, your credit scores are not. To obtain your score, go to and buy that information from Fair Isaac Corporation. While each bureau uses its own algorithms to create proprietary scores, most lenders use "FICO" scores.)

What to look for

When you get a copy of one of your credit reports, look it over to make sure your personal information is accurate, and especially that you recognize all credit accounts listed. If you see any you don't recognize, that may be a sign of identity theft (this is a primary reason some people like getting one report every four months — it doubles as a low-level identity-theft monitor).

Five factors affect your credit score. It's difficult to gauge the exact impact any one of the five may have on your credit score, or how quickly any changes will show up. Many moving parts are involved in determining your credit score, each working in synch with the others. Your score is ever changing based on all these moving parts.

Nevertheless, you don't have to be completely in the dark. Let's look at the five factors that go into calculating your credit score and what to look for on your reports.

  1. Payment History
    Your track record of paying creditors on time counts for 35% of your score. Each bureau reports this information differently.
    • With Equifax, the ideal is for the "Status" of each account to be listed as "Pays as Agreed" and for "Date of first Delinquency" to read "N/A."
    • With Experian, look for a "Status" of "Never Late" and the "Payment History" to show "OK."
    • With TransUnion, you want the "Pay Status" to read "Paid or Paying as Agreed" and the "Past Due" and "Late Payments" sections to read "0."

    If you see indications of late payments that are in error, contact the specific creditor, plead your case (it'll help to have proof!), and ask the creditor to contact the credit bureau(s) to request a change to your file.

  2. Amounts Owed
    Otherwise known as "credit utilization," this pertains to how much of your available credit you are using, and determines 30% of your score. Once a month, the credit bureaus check to see how much you owe each creditor and compare that to the account's credit limit (regardless of whether you pay your balance in full each month). Here's an example of how it's calculated: If you have a credit card with a $10,000 credit limit and you have made $1,500 worth of purchases, your utilization for that card will be 15%.

    Only the Equifax credit report shows this information. You'll find it on the first page under "Accounts" where your debt-to-credit ratio for each type of account and in total is listed. It's important to keep your use of "revolving" credit, such as credit cards, to less than 20% of available credit — both for each card as well as your overall total. If it's much higher than that, decreasing your use of credit will likely improve your score more quickly than any other action you can take.

  3. Length of Credit History
    This counts for 15% of your score. Some people are tempted to close old, unused credit-card accounts, but they're concerned that doing so may hurt their score by shortening their credit history. It's usually best to keep your accounts open. However, the reason has more to do with credit utilization than credit history.

    Information about a closed account will stay on your report for at least seven years. The fact that it will eventually drop off could one day hurt your score, but the bigger issue is that closing an account will likely raise your credit utilization, and that could hurt your score much more quickly. For example, if you typically charge $1,500 of purchases per month and your credit limit across all cards is $10,000, you're utilizing 15% of your available credit. But if you close an account with a $5,000 limit and continue charging $1,500 each month, your utilization will suddenly become 30% ($1,500 divided by $5,000). In order to maintain a strong credit score, therefore, it's generally best to not close old accounts.

    There may be one exception to this general rule. Some people might feel that having access to too much credit may tempt them to do some undisciplined spending. They want less credit available as a way to remove that temptation. In that event, we suggest at least keeping the card with your longest history open so as not to shorten your credit history to the detriment of your credit score.

  4. Types of Credit in Use
    The credit-scoring model prefers that you have experience using both revolving credit (credit cards) and installment loans (auto loans, student loans). Your credit mix impacts 10% of your score. However, it is not advisable to take out any new loans just for the purpose of trying to improve your score! While improving your score is a worthwhile goal, it's not worth borrowing money unneccesarily to do so.
  5. New Credit
    This impacts 10% of your score. Opening several lines of credit in a short period of time can weigh on your credit score, at least temporarily.

Other information

Your reports will also show who has reviewed your credit file recently. Numerous recent credit checks from companies where you have applied for credit (known as "hard pulls") can lower your score. Make sure you at least recognize the organizations making such inquiries. If you don't recognize them, this may be another indication of identity theft.

Some types of inquiries will not impact your credit score (so-called "soft pulls"), such as when a prospective employer checks your credit report (which can be done only with your permission) or when you request your credit report.

On the Equifax report, be sure to review the "Negative Accounts" (late payments), "Collections" (accounts turned over to a collection agency), and "Public Records" (bankruptcy, foreclosure) sections. Any activity listed here will really lower your score, so make sure there's nothing in this section that shouldn't be there. Most of these negative marks must be removed after seven years.

Information about how to correct mistakes on your credit report and what to do in case of suspected identity theft is included in each report. Stay away from companies that offer to fix any errors or "repair" your credit for a fee. The Federal Trade Commission says they can't do anything for you that you can't do for yourself for free.