Have you ever applied for a loan, tried to rent an apartment, wanted to buy a house or a car? Maybe you didn’t understand why you were turned down or given a higher interest rate than you were expecting. The problem is most likely your credit report. Every person who has ever taken out credit of some kind – a credit card, a mortgage, a utility bill, a car loan – has a credit report on file with the three major credit reporting bureaus. This credit report keeps track of your payment record and allows anyone asking for a copy of your report to see if you are a good risk. Your credit report affects the outcome of every financial decision you’ll ever make so it is important to understand and guard it carefully.
There are three major credit reporting bureaus – Equifax, Experian and TransUnion. It is from these three agencies that anyone assessing you for any financial responsibility will ask for a credit report. Creditors regularly send reports to these companies regarding your reliability in making payments. The agencies then assign a credit score to your report based on your payment history. Unfortunately, the formula used to calculate these scores is not readily available. However, generally speaking, the more consistent you are at paying your bills on time, the higher or more favorable your credit score will be.
A good credit score is necessary to receive the best interest rate, the best insurance rate and sometimes even the best job. In short, the better your credit score, the more money you will save in the long run. In fact, many employers are now checking credit scores to ensure that you are a responsible individual. So, how can you make sure that your credit report is in the best shape for you?
- Pay your bills on time, every time. If you are having financial difficulties, it is vitally important that you run toward your creditors and not away from them. In other words, if you are going to have to pay a bill late, call and speak to someone in customer service and let them know. Your creditor may not be feeling very charitable but your chances are better for a favorable outcome if you call them before a late payment is necessary.
Start paying off your debt. An important part of your credit score is your debt to available credit ratio. The less debt you have compared to the credit that you have available, the better your score will be.
Check your credit reports annually. Several years ago, lawmakers passed a law allowing each person to view one copy of their credit report from each of the three major reporting companies once a year. You can order your free reports at www.annualcreditreport.com. Do not use any other site to secure your credit reports. There are other websites offering you this service for an enrollment fee. If you are only viewing your report once a year, you should not have to pay for it. However, to include your credit score in your credit report you will have to pay a small fee.
Carefully review your reports and make sure that all of the information on them is correct. The report from each of the agencies may contain varying information. It is not uncommon for incorrect information to sneak its way onto one of your reports. If you find false information, immediately contact the agencies that have reported the information and request a correction. Each agency has a procedure available on their website for disputing information on your report. They will investigate your claim and if they find that the information is, indeed, incorrect they will remove it from your report.
If you become the victim of a crime that involves the theft of your identifying information (social security number, driver’s license, your computer is hacked, your checkbook is stolen, etc.) you should immediately file a fraud alert with all of the agencies. This will ensure that no one will be able to take out credit in your name without your permission.
If you can afford it, join an identity theft protection company such as LifeLock. While membership in these types of companies does not guarantee that your identity will not be stolen, they go to great lengths to protect your identity and some even offer up to a one million dollar guarantee that your identity will not be stolen while you are a member.
Protecting and improving your credit report is one of the best ways to take control of your finances. A good credit score is unusual in today’s economy. A higher credit score is like making the honor roll and opens up the door to better financial opportunities for you and your family.
Kim is the wife of one rockin' Worship Pastor and full-time mom to four crazy and beautiful kids. Toss in a part-time job, housework, writing, training for a foster care license and what passes for a social life these days and she’s still wondering how she fits 32 hours into a 24 hour day
