6: Order Your Free Credit Report

This is Millionaire Mommy Next Door's

Baby Step to Financial Freedom #6

Why is it important to order your free credit report?

Your credit report contains information about where you live, how you pay your bills and whether you've been sued, arrested or have filed for bankruptcy. Some estimate that as many as 80 percent of all credit reports contain errors or misinformation.

Lenders, insurance providers, merchants, landlords and employers check credit ratings. If you have a low credit score, you'll likely pay more for car and home insurance, cell phone contracts, credit card and loan interest rates, and apartment rent. A good credit score can save you thousands of dollars over the course of your lifetime.

A poor credit report can even make it difficult to land a job. Some employers believe that if you're irresponsible with your financial life, you're likely to behave similarly at work.

The General Accounting Office estimates that as many as 750,000 Americans are victims of identity theft every year. Many more people don't even know they've been victimized. Keep tabs on your credit report so you can uncover wrongdoings as soon as possible.

Last but not least, you'll need your credit and loan balances for a couple of my upcoming Baby Steps to Financial Freedom.

Instructions:

1. Order your free credit reports

AnnualCreditReport.com is the official site to help consumers obtain their free credit report. Make sure you access the right web site because there are hoards of online imitators. This site allows you to request a free credit file disclosure, commonly called a credit report, once every 12 months from each of the nationwide consumer credit reporting companies: Equifax, Experian and TransUnion. Asking for your personal report won't hurt your score.

Tip: Since you are allowed one free credit report from each of the three reporting agencies every 12 months, consider ordering a single report from just one of the agencies and rotating orders every four months. This allows you to keep a closer eye on your credit report for errors and identity theft while avoiding fees.

2. Report any errors found on your credit report

If you find a mistake on your credit report, such as an account that isn't yours or a disputed late payment history, you'll need to follow the agency's instructions to clear up the errors.

3. Purchase your credit score

Remember, credit reports are free, but you need to pay to see your current credit score. Credit reports are used by the credit bureaus to create your credit score. Your credit score is a mathematical calculation expressed by a three-digit number that lenders often use to rate your creditworthiness. The higher your credit score, the more likely your are to make payments on time.

Ordering your credit score will cost about $5.95 and up, depending on whether you purchase a credit monitoring package, too. You can purchase your credit score several ways:

• You can purchase a credit score when you request your free annual credit report through AnnualCreditReport.com.
• You can order all three of your credit scores from http://www.myfico.com/.
• Alternatively, contact the nationwide consumer credit reporting companies: Equifax / Experian / TransUnion

Tip: MSN Money provides a free online credit survey. Answer their 10 questions to see your potential credit score range.