Of course, you can try to monitor your credit on your own. However, the money you save with the do-it-yourself approach might not be worth the effort required to monitor your credit effectively. To dispute items on your credit report requires a lot of effort and time, and you might not even have the know-how to do so. Similarly, monitoring your credit is a full-time job, and you probably cannot commit that kind of time.
 
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Understanding Credit: What You Need to Know about Your Credit

To help you make an informed decision on credit monitoring, you'll first want to understand how credit, credit reports, and credit scores work.

Credit Reports

A credit report is a sort of report card on your financial situation. It documents your current and past credit obligations. This means all of the debts you have acquired in your lifetime show up on your credit report, in addition to your payment history on those debts. Aside from debts, credit reports also disclose a great deal of personal information about you. Such information usually includes your name, social security number, past and present addresses, employment history, and date of birth. Three companies maintain these reports: Experian, TransUnion, and Equifax. Any time a creditor requests information about you, these credit bureaus will supply the information. Legally, the credit bureaus are also required to keep track of any parties who access your credit report.

Who Sees Your Credit Report

Because of the Fair Credit Reporting Act, access to credit reports is now limited to the following situations:

  • Valid financial transactions, such as extending credit, debt collection, or monitoring the credit of a present customer
  • Court orders
  • Screening of candidates for employment
  • Determining government grant eligibility
  • Insurance inquiries
  • Your request
  • Risk assessment for loans
  • Government inquiries into ability to pay child support

Everything You Need to Know about Credit Scores

Using an algorithmic mathematical model, the credit bureaus evaluate the information in your credit report to issue you a three-digit number that represents your creditworthiness. Although credit scores can fall anywhere between 300 to 850, most consumers fit in the 600-800 category. Here are the determinants of your FICO credit score:

  • 35% is your history of payments
  • 30% is your present level of debt
  • 15% is how old your credit history is
  • 10% is the application for new credit
  • 10% is the kind of debts or accounts on your report