One of the realities of the current way that we interact with money as a society is that credit is important.
Indeed, credit history is one of the most important elements of your finances. Building your credit is vital if you want the best interest rates, and even if you want lower rates for your insurance policies.
If you want to build your credit history, one of the easiest ways is to use a credit card. Credit cards can help you build your credit, and improve the chances that you are approved for loans, and that you get the best possible interest rates on loans, saving you money.
However, just having credit cards isn’t enough.
You also need to keep track of what’s happening with your credit report.
What is a Credit Report?
Your credit report is a compilation of information about how you interact with credit. This includes the number of accounts you have, as well as your payment history. Every time you borrow money, whether it’s a car loan or a credit card or a payday loan, it is reported to one (or more) of the three major credit bureaus (Experian, TranUnion, and Equifax). Your payment history, as well as your balance, on each credit account is also reported.
The information in your credit report is used to create your credit score.
Why You Should Regularly Check Your Credit Report
The main reason to check your credit report regularly is to make sure that the information that the credit bureaus have on you is accurate. Yes, they can mistakes.
If there is inaccurate information about how much you owe, and whether or not you have paid on time, it can affect your credit score. Errors on your credit report can cost you hundreds of dollars if you have to pay a higher interest rate as a result [did I say hundreds? it could be tens of thousands if we're talking about a mortgage].
You are entitled to dispute inaccurate items on your report, and have them removed so that your credit report accurately reflects your credit history.
Another reason to check your credit report regularly is to help you catch identity theft.
If someone opens a loan account in your name, you might not know about it if you aren’t keeping track on your credit report. Checking your credit report can help you identify identity theft early, and help you take the appropriate steps as quickly as possible.
How to Check Your Credit Report
The best way to get one free copy of your credit report from each of the bureaus every year is to visit www.AnnualCreditReport.com.
This site was created in response to a federal law that requires the credit bureaus to offer you one free report each year. If you have already received your free reports, it’s possible to pay for a report at one of the credit bureaus. Most bureaus offer reports from the other two as well, and you can get all three from MyFICO.com.
Hint: Spread out your credit report requests for one every four months. This way you can check a report at different times of the year. Remember you only get one report per credit bureau per year.
Additionally, you are entitled to a free report from the credit bureau that provided information that resulted in a negative outcome. So, if you are denied credit, or if you have to pay a higher interest rate, you can write in to the applicable credit agency and receive a free report.
Take advantage of these tools to check your report and ensure that all of the information contained in your report is correct.
If you don’t check your credit report regularly it could be costing you money!