When was the last time that you checked your credit report?
I feel terrible saying this but in my case, it has been a while! For some reason, I am pretty good at procrastinating on checking it.
Monitoring your credit report every few months is a good habit. It helps you not only becoming aware of the status of your personal finances but also monitoring against identity theft.
What Is a Credit Report?
A credit report is a record that tells the story of your money management habits. It contains information about all debt or lines of credit open in your name. It details your bill-paying history, the standing of your loans, and whether you have any liens, have filed for bankruptcy, or foreclosed on a property.
Besides your financial information, your credit report includes a lot of personal information. From your name -including any name variations- to your Social Security number and any addresses where you have lived.
Lenders, employers and even landlords check your credit report to decide whether they want to do business with you or not.
There are many good reasons to check your credit report today, but I will offer the following six:
Why should you check your credit report now?
1. Because it is free!
By federal law, consumers in the United States are entitled to access their credit report. You can review it free of charge once every 12 months from each of the three major credit reporting bureaus:
If you run a web search for “credit report”, make sure that you end up on the right site. You want to go to www.annualcreditreport.com. Don’t fall for scams or services that offer your credit report for a fee.
Also, know that access to your credit report does NOT include access to your credit score or FICO score. In fact, your credit score or rating is often offered at a fee. Sometimes credit card companies and other financial services provide it to their clients along with their monthly statements without an extra charge.
2. To be proactive against identity theft
After the Equifax data breach announcement on September 7, 2017, the smart thing to do is to immediately check your credit report.
You want to make sure that all the accounts that show up actually belong to you. If you see any new credit accounts popping up and you did not authorize them, immediately notify the credit bureaus. You might be facing a case of identity theft.
Keep in mind that due to the data breach, Equifax is offering American consumers free access to credit report monitoring and identity theft protection for an entire year. For more information and to sign up check out this related article I wrote: Now what? Life After the Equifax Data Breach.
3. To correct any mistakes
It is possible to find mistakes on your credit report.
A few years ago I realized that somebody had used my name and old address to order music CDs through the mail and never paid for them! Sure enough, it was showing on my credit report as a collections bill.
I became aware of this issue by checking my credit report and filed a dispute with the credit bureaus. After a little paperwork and some back and forth to confirm that I hadn’t ordered those music CDs, they finally removed the bad record from my file.
4. To get better interest rates
Mistakes, errors, late payments, unpaid bills, bankruptcies, liens and more, affect your creditworthiness.
If lenders perceive you as somebody who is not responsible paying bills or managing money, they might not want to loan you any. You can appear to be a high-risk client and might end up getting high-interest rates on your loans.
If you are borrowing money, for example, to buy a house or a car, even a one percentage point in your interest rate would make a huge difference over the life of the loan.
Many years ago I applied for a car loan and I had never checked my credit report before. At the dealership, I learned that I had a $16.00 bill showing up in collections. Sixteen dollars! As it turns out when I moved out of my college apartment the gas company didn’t have a forwarding address and reported this as an unpaid bill.
I had no idea! Regardless, the collections bill brought my credit score down. It didn’t prevent me from getting the car loan but it did result in a higher interest rate. Lesson learned!
5. To course correct and open new doors
Knowing your credit history can be a sobering experience because I believe that the status of your personal finances is a reflection of who you are.
Your behavior towards paying your bills can tell A LOT about your personality. Are you organized with your money? Do you pay your bills on time? Have you ever filed for bankruptcy? Is your credit history improving or getting worse?
Good to know
Having bad credit history can have many negative implications in your life. For instance, it can hinder your ability to get a job. Employers looking at your credit report can interpret that information in terms of how responsible, reliable, and trustworthy of an employee you might be.
Credit reports not only include information about your finances but also about any lawsuits. Let’s be honest, we all know that with this information employers can judge whether or not you are a person of character, and a good fit for the job and the company.
For instance, if you are applying for a job at a bank and your report shows that you have filed for bankruptcy, the employer may see that as a red flag. A negative credit history can potentially ruin your chances of getting a job.
6. To be able to rent an apartment or home
It is a pretty standard practice for landlords to run credit reports during the leasing application process. Furthermore, based on your credit history they can decide whether to rent to you or not.
Just think about it. Would you like to rent your own home to somebody that has a history of not paying the bills? Wouldn’t you feel more confident as a landlord knowing that your tenants have been financially responsible? Chances are responsible tenants are more likely to pay the bills and also take care of the property!
As you can see, staying on top of your credit report is extremely important!
Know your consumer rights and take advantage of them! Constantly monitor your credit activity at least once every 12 months from each of the three credit reporting agencies: Transunion, Experian, and Equifax. If you find any flaws, make sure to contact the credit agencies immediately.
Uncorrected mistakes can result in huge headaches! If you discover lines of credit that you did not authorize, you might be dealing with Identity Theft. Be proactive and report it to the authorities.
For more information on how to deal with identity theft visit www.IdentityTheft.gov.
Being aware of your credit history can empower you to take action and make a positive change on your personal finances. Believe that when you take ownership of your actions you will be perceived as a responsible and trustworthy individual, and more opportunities will open up for you!
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