Your credit report affects more than the interest rate on your credit card and your chances of being approved for a loan. It can affect your ability to find a job, rent an apartment, or get affordable auto insurance. If you haven’t checked your credit report recently, you might be sending the wrong message to more people than you think.
Are you not convinced that you should check your credit report now? Read on to find out why you’ll change your mind.
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Your credit report may contain errors
According to the Federal Trade Commission, 20% of Americans have incorrect information on their credit reports. If your rental application, credit card application, or job offer were refused due to an administrative error, you’d be angry, right? Avoid this by regularly checking your credit report.
Check the accuracy of your credit report, keeping an eye on the following:
- Late Payments – Was the payment in fact late or did the creditor make a mistake?
- Active Accounts – Do all accounts belong to you?
- Closed Accounts – Are you close accounts, or was there an error?
- New Investigations – Have you started the investigations, or is it possible that someone else has stolen your identity?
- Collections – Are collection accounts accurate?
If anything does not seem correct, contact the reporting credit bureau first. All three offices – Equifax, Experian, and Transunion – provide an online dispute form. Complete it with as much information as possible and include any supporting documents you have to prove your point. Each dispute must include the facts and the action you are requesting (deletion or rectification).
After contacting the appropriate credit bureau, contact the creditor who reported the inaccurate information. Write the creditor a letter with the same details and reasons and provide the documentation you have to prove your claim.
If the creditor sticks to their original report and the credit bureau does not come to a different conclusion, the bureau should include a statement of your dispute on the credit report for future creditors to see.
It’s important to check your credit report well before you go through a credit check for a loan, job, or credit card application. An inaccurate credit report can cause you to be turned down for a loan, a lease, or even a job. On top of that, it can cause you to pay higher interest rates on loans, higher insurance premiums, and higher APRs on credit cards.
Someone may have stolen your identity
According to the 2018 Javelin Identity Fraud Report, 16.7 million Americans were victims of identity fraud in 2018. Identity fraud can include opening new accounts in your name and using your existing accounts, such as credit cards, to make fraudulent purchases.
While you may see unauthorized transactions on your statement from an established account early on, it’s less obvious when someone opens an account in your name. Without knowledge of the account, some victims only find out once they start receiving collection calls for unpaid balances. At this point, it could take months to resolve the situation. Once you find out, file an identity theft report with the FTC and place a credit freeze on your account.
Checking your credit report now can help ease the shock and reduce the amount of work you need to do to repair the damage.
You must respond to future lenders if you want new credit
If you plan to apply for new credit in the near future, lenders will review your credit report. Knowing what’s on it helps determine your next steps.
If your credit is in worse shape than you thought, take the time to correct it before applying for the new loan. For example, catching up on late payments, dealing with collections, or reducing excessive credit card debt can improve your credit score and your chances of loan approval.
You may also find accounts that do not belong to you on your credit report. Lenders use all of the debts reported on your credit report to determine your debt-to-income ratio. Accounts that don’t belong to you could inflate your DTI ratio, lowering your chances of loan or credit card approval.
Even if the information on your credit report is correct, you need to know what it says. Maybe you’ve forgotten about the 30-day late payment you made a year ago or the medical account that accidentally got picked up. Preparing yourself in advance can help you have a productive conversation with your potential lender.
Your potential new job may depend on your credit report
16% of employers check all applicants’ credit before making a hiring decision for all positions, according to the National Association of Professional Background Screeners
Employers look for red flags on your credit report that can signify problems. They take a close look at your credit balances, as well as your bankruptcy history. Employers want to know if you are in any financial situation that could cause you to resort to illegal tactics, such as theft or bribery.
Employers also review your credit report to get a feel for your sense of responsibility. If your credit report has many late payments or excessive amounts outstanding, this could be a sign of irresponsibility. Although credit checks are more common for executive, managerial, or money management positions, any employer can request to withdraw your credit before making a decision (although they cannot do so without your permission. written).
You get a free credit report from every credit bureau
Through the Fair and Accurate Credit Transactions Act of 2003, you can receive one free credit report from each of three credit bureaus per year. Just visit AnnualCreditReport.com to start. Rather than waiting until the end of the year to retrieve all three reports, spread them out throughout the year. This way, you can quickly spot credit issues and take the necessary steps to resolve them immediately.
It’s easy to get your free credit report and it won’t hurt your credit score. Within minutes, after verifying your identity, you will be able to download and view your credit report at your leisure. Take your time to read each line for accuracy. Compare the report to your records and immediately dispute any issues you see.
Don’t wait until the end of the year to check your credit report
From now on, create a plan to spread your free credit reports. Even if you don’t plan on applying for new loans in the near future, knowing what’s on your credit report can help you in other areas of your life. Checking a report every four months gives you a better chance of keeping your credit report accurate and attractive to lenders, insurance companies, homeowners, and employers.