By John W. Schoen Senior Producer

June 6, 2005 — Answer Desk readers seem to spend a lot of time wondering (and worrying) about their credit rating. Chris in North Carolina wants to find out what the credit bureaus are saying about him — but he doesn't want to have to pay for it. Meanwhile, with interest rates on student loans set to rise July 1 , Liggia in Miami wants to consolidate her loans — but she's worried that it will hurt her credit rating.

I understand that I can get a free credit report from each of the three credit agencies. What I don't know is whether requesting these reports could actually negatively impact my credit score in the short term. I understand that these agencies factor in how many times your credit information is accessed in determining your credit score. I am preparing to buy a house and would like to verify that the information in my reports is correct, but I don't want to have my credit score lowered in the process.
Chris, Cary, N.C.

Go ahead and order up a copy of your report, Chris. The credit police can’t ding you for simply finding out what they’re saying about you. (And earlier edition of the column incorrectly reported that North Carolina residents were eligible for a free report. Unfortunately, consumers your state will have to wait until the program is fully completed in September.)

It’s true that multiple credit inquiries from different lenders at the same time might hurt your credit rating — on the theory that you’re out there shopping for debt and may be taking on more than you can handle. But our MSNBC.COM colleague Bob Sullivan — who knows this stuff inside and out — says those kinds of credit checks are what are known in the trade as “hard polls” of your file. When you just ask to see what’s in your own file, that’s a “soft poll” and won’t — or shouldn’t — change your credit score.

Until recently, you had to pay each credit bureau to find out what they were telling lenders about you. And if you go directly to the Web sites of the three major credit bureaus — Equifax, Experian and TransUnion — they’ll still try to charge you for your report. They’ll offer you either one report at a time or a “subscription” giving you periodic updates of what they’re saying about you.

But under the Fair and Accurate Credit Transactions Act of 2003 — the so-called FACT Act — you’re entitled to a free copy of your report, once a year, from each of those three credit bureaus. Your free report should tell you what’s in your file — both outstanding debts and those you’ve paid off, along with how well you’ve kept up with your payments and who has seen the information.

Because the service was phased in over time, if you live in most of the Northeast and MidAtlantic, you’ll still have to wait for your free report until this September. State laws in Maine, Maryland, Massachusetts, New Jersey and Vermont require that the credit bureaus give you a free report. But they don’t make it as easy.

If you live in the rest of the country, just go to a Web site called and order your free reports. You can download them from the Web site or have them delivered by mail within two weeks. If you prefer, you can also request a copy of your report by mail or by phone. You can order from all three bureaus at once — to compare what everyone is saying about you at the same time — or order from just one bureau every four months to track changes through the year.

But use the link on this page or be sure to type the address carefully. Bob Sullivan reports that there are dozens of sites out there hiding in the bushes — with similar words or spellings — that claim to offer free reports but end up charging you a fee.

Alas, you’ll still have to pay the credit bureaus to find out your credit score — the three-digit number that, judging from the Answer Desk mailbag, a lot of American borrowers have come to obsess over.

For a look at how credit bureaus come up with your three-digit score, head over to Fair Isaac & Co. Web site. That’s the company that came up with the original “FICO” scoring system. Keep in mind that each credit bureau may use a slightly different formula, so you may get a different score from each bureau.

Will consolidating my student loans affect my credit in a negative way?— Liggia G. , Miami, Fla.

It shouldn’t — by itself — if you’ve made your payments on time. Even if you’ve missed payments, if you consolidate at a lower rate, your credit standing could improve because your total debt load would be lower. But if you apply with too many lenders at once, those inquiries could lower your score.

The biggest impact on your credit score generally comes from your credit history — how well you’ve done in paying your bills on time (35 percent). The next biggest factor (30 percent) is the amount you owe — so if consolidating cuts your debt load, that’s a good thing. The other factors: How long you’ve had credit (15 percent) and the types of credit (10 percent) won’t change. The only place you many get dinged is if the consolidated loan is added as “new” credit (10 percent).

But don’t get too hung up on credit scores. Just as plenty of kids with perfect SAT scores don’t get into Ivy League schools, a “perfect” credit score doesn’t guarantee you a loan any more than a “bad” score forever banishes you from getting credit. Sure, it’s important to keep a good credit history. But it’s easy to get carried away worrying about that three-digit number. Different lenders view scores differently anyway. If you only carry debt that you can afford, and pay your bills on time, you should be fine.

The biggest problems come when people consolidate credit to lower their monthly payments by stretching out payments at at higher interest rate. This slight of hand is very popular among debt consolidators because many people don’t realize they’re stuck a bigger pile of debt. They just focus on the lower monthly payment.

So watch out for those “debt consolidators” lurking on the Internet and late night TV. For more help with debt consolidation, contact the National Federation of Credit Counselors in your area.

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