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One of the best bits of “life-maintenance” advice available for the contemporary American is to “check your credit reports often.” Federal law makes it possible for everyone to receive a free copy of their credit reports every year from the three major credit reporting agencies, but most people don’t bother to take advantage of the opportunity.
Your credit report contains a sizable collection of information about you as it pertains to any creditor you are currently dealing with including your mortgage or landlord company, your utilities, credit card companies and auto or other types of loans. Any creditor that has your social security is allowed to, by law, place information on your credit report that accurately refers to the status of your relationship with them including on-time or late payments, defaults, modifications of your credit or loan agreement and bankruptcy. Using a complex mathematical formula, the information on your three credit reports is combined to form a “quick view” score analysis known as your Credit Score. This score can range from as low as 350 (terrible credit) to 850 (perfect credit). In the U.S. the current average credit score currently hovers just above 700 which indicates good, strong credit.
Why Check Your Credit Score?
Your credit score is a strong indicator of many things for you that you should know before making decisions in life such as whether to apply for other loans, move, or even look for a job, because some employers consider a good credit score key in determining whether or not a potential new hire would make a good employee. There are many reasons to keep on top of your credit score, but the three main ones are:
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Know if You’ve Had Your Identity Stolen: The best reason to you’re your eye on your credit score and credit reports is because doing so is going to be the fastest way to determine quickly if you become a victim of identity theft. Last year very nearly 1 in 10 Americans were the victim of Identity Theft, and nearly half of all victims do not know they’ve had their identity stolen for years. If you discover the theft quickly and act upon it, the odds of nabbing the thief increase drastically.
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Check and Correct Errors: You have the right to protest or correct errant items on your credit report. It is a faulty assumption of many that false things do not or would not appear on a credit report, that the agencies that put information on your credit report are somehow flawless and do not make mistakes. Keep in mind that people are correcting faulty information on their credit reports every day of every month of every year and you are likely no different.
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Avoid Wasting Money on Application Fees: Thinking about applying for a new home loan? That comes with an application fee. What about applying for a car or personal loan through your credit union or bank? Those often come with an application fee as well. If you decide you need to apply for such a loan and pay the fee only to learn that your credit is not sufficiently high to warrant a loan, you will have wasted your money, not to mention undergoing some embarrassment that could have been avoided with a simple pre-application credit score check.
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