By Dayana Yochim
The Motley Fool
August 11, 2004

Most people go on High Credit Report Alert before a big financial event such as buying a house, applying for a home equity loan, leasing a car, or getting a new credit card. For the rest of us, an occasional look into the official credit record is sufficient.

If you're like me, you're sticking with your current credit card and pay your balance in full every month (so the interest rate isn't an issue). You're not in the market for a mortgage or a car loan, and are happy tooling along without a credit care in the world. Unless I suspect something fishy -- like that other Dayana Yochim trying to get a credit card in my name -- I'm not going to worry about what the credit bureaus have on me.

But maybe I should. If you've paid any attention to the news or your worrywart neighbor, you might have noticed that credit scores are a hot topic. These days, there are a lot of prying eyes. Your banker, broker, insurance agent, employer -- as well as some pretty shady folks -- want to know all about how you handle money.

Consider these everyday scenarios that can go one way or another depending on how you rate with lenders:

Do you use a credit card? We all know that it's a straight line from our credit score to the credit card interest rate we qualify for. And if you're among the 40% of cardholders who pay your balance in full each month, you needn't fret too much whether your card has a 2.9% APR or a 24.9% APR. However, you might not know that your banker is keeping very close tabs on even the most responsible customers like you. While they're thrilled that you're paying their bills on time, they want to know how you're conducting yourself with their competition.

Lenders are increasingly instituting the "universal default" clause, which is a lawyer-ese way of saying, "If you goof up with someone else, we've got a right to punish you." Today nearly 40% of lenders have this clause written in tiny type in that cardholder contract that most of us ignore when it falls out of our monthly statement. Guess what? It's time to read the fine print. That clause allows lenders to raise interest rates based not on your history with them, but based on your payment history or credit activity with other companies. If you occasionally carry a balance, or are even thinking of making a bigger financial move in the future, you might want to see what your credit report card says about you.

Do you have car insurance? Does how you handle money have an impact on your skills behind the wheel? Your car insurer thinks so. In addition to your history for fender benders and moving violations, more insurers are relying on your credit score as a measure of you insurability. In a quick car insurance comparison shopping spree, I learned that all the major insurers -- including Travelers, AIG, Liberty Mutual, GEICO, and Safeco -- will check my credit history where permitted by law.

Are you happy at your job? Should my employment circumstances change, I shouldn't be surprised when an interviewer asks me to sign a release so that they can access my credit file.

Are you overpaying for your house? Nowhere does one's credit history have a bigger impact than on the biggest purchase you'll probably ever make -- a home. Twenty points (plus or minus) on your credit score determines whether you or your mortgage lender pockets thousands of extra dollars. It's not chump change, that's for sure. When I clicked over to our Rate Center today, I noticed that a FICO score of 699 qualifies for a 30-year fixed mortgage of 6.458% (national average). Add a single point to your score, and you knock off half a percentage point and qualify for a loan at 5.921%. Thinking of adding a spare bedroom or sprucing up your kitchen? Better hope you're a 720 or above so you can get a home equity line of credit at 5.181%. Pay a few bills late in the past several months? A 679 FICO gets you 6.806%.

The credit report card has become ubiquitous. It's our Adult Report Card where we get a Pass/Fail based on a detailed transcript of our grown-up borrowing ways.

For the next two weeks, I'm going to cover the major credit issues for the average guy and gal. This series is for you if, like me:

You haven't checked your credit report in quite a while. Who knows what's accumulated on your report? And aren't you just a wee bit curious to see if that college charge card is still considered an open account?

You are a tad competitive and want to see how you compare with the card-carrying nation at large (and your co-worker in the next cubicle).

You want to make sure that what's on your permanent record is an accurate reflection of the true you.

But I'm not going it alone. Nearly everything I know about credit I learned from the Fool community -- the diverse world of people who congregate daily on our discussion boards. There's no better advice than that offered from experience. And the people on the Consumer Credit/Credit Cards discussion board are thoughtful with their advice, open in their debate, and generous with details. So I enlist their help for the next three weeks (and every day afterwards, as is customary) to welcome newcomers with their usual open arms, words of inspiration, and thoughtful, friendly advice.

Why I care now

What inspired my sudden burst of interest in this measure of my money skills? One of our advertisers, actually. You may have noticed ad banners on our site (particularly in our Credit Center) by a company called TrueCredit. TrueCredit is the consumer arm of TransUnion, one of the big three credit reporting agencies, along with Experian and Equifax. During a conversation with TrueCredit's marketing folks, I learned about a new product the company was rolling out in August. Its 3-report/3-score report is exactly what it sounds like: a single document that contains all the data from your TransUnion, Experian, and Equifax credit reports, plus the three-digit credit score each bureau has assigned to you.

The product's ease of use is particularly appealing. In a single transaction customers get all the necessary data for a complete credit picture. With the information presented in a single apples-to-apples format, finding errors is much easier. Plus, unlike the rumors, disputing information provided by any of the reporting bureaus could be accomplished without having to order and pay for a separate report from the offending agency.

Finally, we talked money. My co-Fools in the sales department have negotiated price breaks for our readers in the past. And TrueCredit was willing to extend a $10 savings on its 3-report/3-score product for those who ordered through Fool.com. So instead of paying $10 each for three separate reports, and an extra $5 or so for each credit score, TrueCredit okayed a $34.95 price tag.

So here goes... I'm taking the first step to see what the lending world is saying about me behind my back. First I'll order my 3-report/3-score transcript. (Full Fool disclosure: You don't have to get this information through TrueCredit. You can order your reports and scores directly from each agency -- Equifax, Experian, and TransUnion -- if you like. We're pleased TrueCredit is willing to offer an all-in-one report and price breaks for our readers, but the choice is yours.)

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