Like any other self exam, a self exam of your credit may be frightening. For instance, if you have a history of illness in your family, you may be afraid to self examine. You may be afraid of what you may find. Likewise, many of us have a history of poverty or bad credit in the family. You may be reluctant to pull your own credit reports due to fear of bad news.
However, a physical self exam can help you to catch an illness at an early treatable stage, clear up a misdiagnosis or prevent illness altogether. When you pull your credit report once a year, you can catch financial problems at the beginning, correct mistakes, and prevent a financial mishap from ever starting in the first place.
There are three major credit reporting agencies TransUnion, Equifax and Experian. A company reviewing you and your credit may use any or all of these, so you should review each, once a year. Here are Five good reasons to pull your credit report:
ITS FREE - BUT NOT THE ONE ON THE TV COMMERCIAL
Since 2003, Federal law (the "Fair Credit Reporting Act" or "FCRA") provides that everyone can pull their credit reports, for free, once per calendar year. You can can also pull your credit reports for free if you were denied credit in the past 60 days. Some states, such as Colorado, Georgia, Maine, Maryland, Massachusetts, New Jersey and Vermont have always allowed their residents to obtain free credit reports. Other states, charged a small fee. However, under the 2003 amendment to the FCRA, anyone can obtain their free credit reports at annualcreditreport.com regardless of their home state.
The so called "free credit report" advertised on television with the funny commercials, and most of the free credit report ads on the internet ARE NOT FREE. These are credit monitoring services that charge a monthly fee to review and monitor your credit report. You can provide these services to yourself. Let me tell you more about that.
PREVENT FRAUD AND IDENTITY THEFT
When you get your credit reports, you want to sit down and read through them. You will see a list of your credit accounts, their balances, and your payment history including: credit cards, car notes, mortgages, store credit accounts, personal and student loans. There will also be information on your addresses and some information on your work history.
You want to make sure that you actually opened the accounts that are on your credit reports. Criminals who commit Identity Theft and Fraud, rely on the fact that most people never pull or read their own credit reports. If you see accounts that are not familiar, ie, mortgages you never applied for, a car note for a truck when you ride a bike to work, if you are a man with mysterous open accounts at Dress Barn, Ashley Stewart, and Catherines, you can report the listings and request an investigation. You can also request a Fraud Alert be placed on your credit reports. A Fraud Alert will require anyone opening a new account to provide additional verification of their identity. If a listing is found to be fraudulent, it will be removed from your credit report.
THE OPPORTUNITY TO MAKE CORRECTIONS
When you read through your Credit Reports, you may not see any obvious signs of fraud, but there may be mistakes. There may be accounts that are listed as open or active, that have been closed. Or accounts that you've paid off, still showing a balance. Your addresses may be wrong. You can make corrections to your credit report. You want to make sure your credit reports are as accurate as possible. When you go to apply for new credit, you dont want to have an incorrect outstanding balance lingering around on your credit report blocking your application. After making the corrections, the credit reporting agency will usually send you a revised credit report for your records.
YOU ARE ABOUT TO MAKE A MAJOR PURCHASE
You definitely want to pull your credit reports before you make a major purchase involving your credit. You dont want any bad surprises when you go for your mortgage, car note or private loan. You want to review it before any company sees it so you can clean up, or at least be able to explain, any irregularites.
Also, we talked about fraud a little earlier. Many housing scams, mortgage scams and high interest car notes happen because the consumer has not read their own credit reports ahead of time. If youve never read your credit report and assume you have bad credit, you may sign up for high interest, or balloon credit thinking you have no choice. Many of the companies that sell bad mortgage products or high interest car loans are hoping that you have no knowledge of your own credit history. Stay ahead of the game. Be an expert on yourself.
To stay on the safe side, use a major bank or lending institution to secure your credit products. Banks have a full range of legitimate credit products for people of all income levels and credit situations. If your credit is damaged, you may be able to get a "secured" credit card, which is a credit card backed by a savings account until you are back on your financial feet.
To improve your over all credit, pay regularly and on time, pay off and close all but four or five of your credit based accounts, make corrections on your credit reports if there are any errors.
LOOKING FOR WORK HOUSING OR LOVE
Many employers pull applicants' credit reports to determine fitness for the job. This is especially true in the financial, banking and security fields. Some government employers also request a credit check along with the general background check. They cannot do this without your permission. They will probably have you sign a "release," paperwork allowing them to pull one of your credit reports or run a background check.
Many managment companies, municipal housing authorities and private landlords use credit reports to determine your payment history and predict your ability to pay your rent to them in the future.You dont want any surprises. You want to be able to review, correct and/or explain any problems with your credit report long before your work or housing application reaches someones desk. You can only do that if youve pulled your credit reports and reviewed them ahead of time.
The newest craze are dating services, or actual dates, requesting your credit score. Your credit score is a number that determines your creditworthiness. Its loosely based on your credit report. If your credit score is reported by "Fair Isaac Co" or "FICO", your credit score can range from 501-990. The only real way to improve it, is to improve your overall credit. Its ill advised to provide such personal information to a dating service or someone you dont know very well. However, once you are engaged or married, it IS advisable to discuss finances, including your spending styles, financial goals and your credit. Money issues break up more marriages than infidelity.
BONUS: AGING OFF
Under FCRA, and also under basic contract law, most negative credit reporting falls off your credit report seven years from the date of last activity. Also, the older it is, the less harmful it is. So, for instance, late payments on a credit card five years ago may still be on your credit report, but less harmful to your credit than your late payments two months ago.
Judgments (when a creditor takes you to court and wins) and Bankruptcies (when you file with the government for legal protection against your creditors), stay on your credit report for much longer than seven years. However, the more time, and regular payment history, you can squeeze between the negative reporting and the present? the better.
Certain items DO NOT age off. Student Loans, Back Taxes and Back Child Support do not age off of a credit report. You must make payment arrangements and try to improve the payment history with these items if they wind up on your credit report.
Let's Be Careful Out There.
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