What's Your Financial GPA?

Ask the closest person to you what their credit score is and there's a 60%  chance that they have no idea! I like to view the credit score as more of a financial GPA or report card. That along with your actual credit report lets lenders know the likelihood of you paying back or defaulting on some sort of loan or line of credit. That why it is absolutely imperative that you keep track of your score and credit history. 
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Check that Report
Many of you may not know that everyone is entitled to a free credit report once a year. The Federal Goverment makes this a requirement of the 3 credit bureaus: Equifax, TransUnion, and Experian. You can get your free credit reports from each of the bureaus above here. Keep in mind you can only pull your reports for free once every 365 days, not every calendar year. So if you pull your reports Dec 1st 2015, you couldn't pull it again March 1st 2016; you'd have to wait until Dec 1st 2016.  You also aren't required to pull all 3 at the same time. If you're thinking of buying a house a year from now and want to track you history up until purchase date; you can pull from one bureau every 4 months. 

I 'll go through some of the information found on the TransUnion credit (they all generally have the same information - just structured differently).

At the top it'll show your personal information: name(s), address, telephone numbers, birthdate, redacted SSN, and date the report was pulled. Then it gets into the accounts that show up on your credit report. The types of acconts shown could include utilities, mortgages, credit cards, car loans, personal loans, etc. It provides details on the type of account, date account opened/closed, status of the account (late, current, collections, repo, foreclosure), and the balance.

After the accounts section, comes the inquiries. Transunion reports three types of inquiries; regular, promotional and account review inquiries.

• Regular inquiries are posted when someone accesses your credit information. It shows who accessed your information and what day they did it. Regular inquries are usually requested by you when you apply for financing/credit or leases. These inquiries will have an effect on your score. If you notice something here that doesn't seem familiar, you may want to get in contact with the company who pulled you report or with the actual credit bureau. Same goes for unfamiliar accounts shown in the accounts section.
• Promotional inquiries are pretty much what they sound like. The companies shown here recieve your name, address and other limited information about you so they can make firm offers of credit or insurance. These types of inquiries do not affect your credit score and are not seen by anyone else who pulls your report. Those annoying credit card offers you get in the mail are usually the result of these types of inquiries.
• Account review inquiries are from companies that obtain your information from your report in connection with an account review or other business transacton with you. So if you you're applying for a job, especially in financial services, expect to see the employer's information here. These types of inquries are also kept from companies and do not have an effect on your score. 

Credit Score
Unfortunately, the feds do not require the credit bureaus to provide you with your credit scores. Gotta come out of pocket for these. Each of the bureaus have different score ranges; 300-850 for TransUnion, 360-840 for Experian, and 280-850 for Equifax. Obviously, the higher the better. Each bureau scores you on the same factors: 

• Number of regular inquiries - One or two regular inquiries may lower your score by a few points, but multiples may be a red flag to lenders. It usually shows that one is desperate for credit and is already being turned down by other lenders. If you're looking for a loan it may be best to research lenders first and then only target 1 or 2 for the best terms.
• Average age of accounts or credit lines- This factor is very important. Companies are usually more willing to lend to someone with a long history of okay history than someone with a short history of great history. Longer history is just more reliable revealing the patterns/habits of the borrower. For the number nerds, the larger the data set the more reliable the data (usually). So for the younger folks out there looking to build your credit history, I would suggest opening a secure credit card with your bank or credit union - only if you're mature/responsible enough to make your payments and to not exceed your limit. I opened one when I was 18 with a $500 secured limit. After a year of good payment history, the credit union returned my $500 and increased my limit to $1,500. 
• Credit Utilization - This factor takes into account the percentage of your credit limits currently in use (utilization). The lower the utilization rate the better. If you have $10,000 in credit limits and have a balance of $4,000, your utilization ratios is 40%. Some professionals suggest its best to keep this ratio under 30%. One caveat to ths is having a $0 balance or a history of closing revolving debt accounts. Why would a bank want to set aside capital for someone who doesn't use it and pay the interest expense when they could set it aside for someone who actually uses it and pays the bank interest on that capital?
• Percentage of on-time payments - This one is pretty self explanatory y'all. Pay your bills on time all the time. Just makes life easier.
• Derogatory marks - Any foreclosures, bankruptcies, accounts in collections and liens will have a pretty large negative impact on your credit score. What's worse, these types of events can stay on your report for 7 - 10 years. Again, pay your bills on time all the time.

I've pulled my reports for the year and am targeting some accounts I need to pay down to improve my debt-to-asset ratio making me a more desirable borrower. Don't need any road blocks on the path to financial freedom when I'm applying for busines loans or rental financing.

So who's going to be responsible and check their credit history? It'll help you in the long run!

FYI: I'm not a financial professional so be do the right thing and consult with someone a lot smarter than me before making large financial decisions.
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