Money and taxes · Easy · about 30 minutes

Credit Reports and Credit Scores

A credit report is a record of how you've handled credit, and a credit score is a number based on that record that predicts how likely you are to repay. Lenders use them when you apply for credit, so it pays to check your reports for free and fix mistakes.

When to teach it: Watch from about 12, help from about 15, do it alone from about 18.

You'll need

Internet access or a phone
Your Social Security number (enter it only at AnnualCreditReport.com)
A pen or highlighter for marking errors
Copies of any papers that prove an error

Step by step

Tick each step as you go if you like; ticks stay on this device.

Go to the official free siteType AnnualCreditReport.com into your browser yourself. You can get free reports from Equifax, Experian, and TransUnion every week. You can also order by phone at 1-877-322-8228.
Look at all three reportsEach credit bureau may have different information, so check each one.
Check your personal informationMake sure your name, addresses, and date of birth are right.
Check every accountLook at each credit card and loan. Do you recognize it? Are payments shown as on time when you paid on time?
Check for negative itemsLook for late payments, collections, or bankruptcy. Accurate negative information can generally stay for 7 years, and bankruptcy for 10.
Dispute errors with the credit bureauExplain in writing what's wrong and why. Include copies (not originals) of your proof and a copy of the report with the error circled. Use the bureau's online dispute or send it by certified mail with a return receipt, and keep copies.
Dispute with the business tooAlso write to the company that reported the wrong information, with the same details and copies of your proof.
Watch for the resultsThe bureau generally has 30 days to investigate and must send you the results in writing. Check your report afterward to be sure the error is gone.
Consider a credit freezeA freeze is free and stops anyone, including you, from opening new credit in your name. Place it with all three bureaus, and lift it for a lender when you need to apply.

Economics

How it works: Why lenders care about your score

Lending money is a risk, because the lender might not get paid back. A credit score is a quick way to estimate that risk from your history. Many scores range from 300 to 850, but companies use different ranges, and you have more than one score.

According to the CFPB, scores look at things like how many accounts you have, how long you've had them, how close you are to your credit limits, and how often you've paid late. Paying your bills on time, every time, has the biggest effect.

One part you can calculate is credit utilization: the share of your available credit you're using. Experts cited by the CFPB suggest keeping it at no more than 30%. Example: a $300 balance on a card with a $1,000 limit is $300 ÷ $1,000 × 100 = 30%.

Applying for a lot of credit in a short time can hurt a score, because it can look like your money situation has gotten worse. Checking your own report doesn't count against you.

credit utilization (%) = total balances ÷ total credit limits × 100

Try it: Make up two pretend credit cards with limits of $1,000 and $500. Try different balances and figure the overall utilization each time. Which combinations stay at or under 30%?

Keep learning: Business Cases

Teaching it to your kids

Pull your own free report and walk through each section with your teen (cover account numbers first).
Parents can ask each bureau for a free credit freeze for a child under 16. It stays in place until you ask to remove it.
Explain that a score is a prediction about paying back loans, not a grade on how good a person is.

Tips

Reports are free every week, so check them before you apply for credit.
A credit freeze doesn't affect your credit score.
If your report changes after a dispute, the bureau sends you a free updated copy.
If a dispute isn't settled your way, you can ask the bureau to add a statement about it to your file.

Common mistakes

Mistake	Instead
Using a look-alike website	Type AnnualCreditReport.com yourself. Many sites use 'free report' in their names or misspell the address.
Thinking that checking your report hurts your score	It doesn't. Checking your own report isn't an inquiry about new credit.
Checking only one bureau	Check all three; each can have different information.
Forgetting to lift a freeze before applying	Ask the bureau the lender uses to lift the freeze, then freeze it again afterward.

Safe habits

Type AnnualCreditReport.com yourself. It and the credit bureaus won't email you asking for your Social Security number or account information.
A credit freeze is free. While it's in place, nobody can open a new credit account in your name, and it doesn't affect your credit score.

Where to get help

If you find accounts you didn't open, that may be identity theft. An identity theft report from the FTC (or a police report) lets you place a free extended fraud alert that lasts 7 years.

Sources

Free how-to guides for families, with nothing to earn, pass or send in. They follow U.S. rules and sources; your owner's manual, product labels and state and local rules come first. This guide explains how things work; it isn't personal financial, tax or legal advice.

📋 Credit Reports and Credit Scores

Name ____________________ Date __________

You'll need

Internet access or a phone
Your Social Security number (enter it only at AnnualCreditReport.com)
A pen or highlighter for marking errors
Copies of any papers that prove an error

Steps

Go to the official free site. Type AnnualCreditReport.com into your browser yourself. You can get free reports from Equifax, Experian, and TransUnion every week. You can also order by phone at 1-877-322-8228.
Look at all three reports. Each credit bureau may have different information, so check each one.
Check your personal information. Make sure your name, addresses, and date of birth are right.
Check every account. Look at each credit card and loan. Do you recognize it? Are payments shown as on time when you paid on time?
Check for negative items. Look for late payments, collections, or bankruptcy. Accurate negative information can generally stay for 7 years, and bankruptcy for 10.
Dispute errors with the credit bureau. Explain in writing what's wrong and why. Include copies (not originals) of your proof and a copy of the report with the error circled. Use the bureau's online dispute or send it by certified mail with a return receipt, and keep copies.
Dispute with the business too. Also write to the company that reported the wrong information, with the same details and copies of your proof.
Watch for the results. The bureau generally has 30 days to investigate and must send you the results in writing. Check your report afterward to be sure the error is gone.
Consider a credit freeze. A freeze is free and stops anyone, including you, from opening new credit in your name. Place it with all three bureaus, and lift it for a lender when you need to apply.

Safe habits

Type AnnualCreditReport.com yourself. It and the credit bureaus won't email you asking for your Social Security number or account information.
A credit freeze is free. While it's in place, nobody can open a new credit account in your name, and it doesn't affect your credit score.

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