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Why Credit Reports and Scores Matter
Many of your financial decisions or lack of decisions can affect your credit reports and scores. In return, your personal credibility can have an impact on many aspects of your life. Many of these aspects are related to your financial life such as:
Qualification of Loans
I am not one to recommend getting home improvement loans, car loans, boat loans and such due to my understanding of the crippling effect that is debt. Realistically, however, sometimes there may be no other option for individuals than to borrow when faced with emergencies in life. Having a clean credit report and a good credit score can make those situations less difficult by having the ability to qualify for a loan. On top of being able to qualify for a loan, the loan could also be accompanied by a lower interest rate as well.
Insurance Rates
There are definitely other factors like driving record in addition to your credit score that affects your auto insurance rates. No matter how fair that may seem, having a better credit score can potentially save your money on necessary expenses.
Employment Opportunities
Most commonly financial industries will pull credit histories along with background checks before hiring new employees. Not having a good credit history or credit score can hinder your employment opportunities. While the financial industries are the most common, there are other industries that could potentially evaluate your credit reports and scores to determine hiring status. Having a good credit history can increase your opportunities for employment in a competitive job market.
Housing Qualifications
Not having any type of credit or having a poor credit history can negatively impact your ability to qualify for housing. Many Property Managers and mortgage lenders will run your credit report before accepting an application to rent or buy a home. Dave Ramsey mentions ways for individuals to retrieve mortgages without a FICO score. That process may take more time and require individuals to keep good financial records. While this process can be helpful for seekers of homeownership, those who want to rent may have to become more creative.
Credit Card Interest Rates & Reward
Having a good credit report and score can help individuals obtain lower interest rates on credit cards and also qualify them for higher rewards. There are ways to take advantage of credit card rewards and using the card responsibly. Many credit cards offer rewards that our typical bank debit cards do not offer. When speaking of using credit cards responsibly, it is referring to never charging more than you can afford at the time and always paying the balance off before the end of the month. In order to take advantage of the best rates and rewards, one must have a good credit score and clean credit history.
Why Review Your Credit
A component of financial responsibility is the ability to review and monitor our credit reports and scores. The thought of checking our credit reports and scores can be nerve-racking. However, the actions of consistently reviewing our credit report and scores can come with rewardable aspects when taking control of your money. These rewards can come in the form of the following:
Knowledge
I am a true believer in that knowledge is power. You can gain powerful insight by learning what is included in your credit history. Having this knowledge allows you to be more informed about your personal credibility. This information will also aid in your ability to determine whether the information is accurate, complete and up to date. Obtaining this knowledge can then empower you to improve the financial decisions needed in life.
Peace of Mind
One can have peace of mind when one knows what is in their credit report and how that information impacts their credit score. Having this knowledge may also ease your mind in regards to identity theft. Everyone can be at risk for identity theft. When you review your credit consistently suspicious activity can be identified and resolved faster. Identity theft can negatively impact your credit and can be preventable by keeping a consistent review of your credit activity.
How To Review Credit Reports and Scores
Credit Reports
Every year, an individual can receive their free credit report from each of the three nationwide credit reporting companies. Equifax, Experian, and TransUnion are the three nationwide credit reporting companies that are used in America. These companies are required to provide a free credit report which is mandated by The Fair Credit Reporting Act (FCRA) in which you can learn more about here.
Our personal favorite way to pull our credit report is through the Annual Credit Report website. At this website, you can pull your report from each credit reporting company. Your credit report will provide you with information on past and existing credit agreements. Keep in mind that each report will be slightly different. Each credit report is slightly different because not all collected credit information is reported to each credit bureau. Reviewing your credit report allows you to determine if everything looks accurate or if there are some discrepancies. When there are discrepancies found in your credit report, additional actions can be taken to correct them.
Credit Score
While credit reports provide a great amount of information on your personal credit history, these reports do not provide you with a free credit score. Your credit score is a grade that is based on the evaluation of your personal credit history. The evaluation of your personal credit history uses five different credit components. These five different credit components are your payment history, credit utilization, length of credit history, a mixture of credit types, and recent credit inquiries.
There are some great resources available that will allow individuals to monitor their scores for free throughout the year. There are two popular websites that many have reported using to provide them with consistent monitoring of their credit scores. These websites are completely free and do not hurt your credit to review. Both products are available for download and can make it easy to review on your smartphone.
Credit Karma
Credit Karma provides a free tool to access your credit score after you sign up for their free account. With this service, you can also receive credit monitoring, credit insights and credit recommendations. These additional services can be beneficial in helping you stay in control of your credit. With these services, alerts are sent to you when changes are made to your score. The credit insights and score recommendations also help you understand how to improve your score.
Credit Sesame
Credit Sesame is another free tool that allows you to view your credit score once you have completed a free account. They provide additional services such as identity theft protection and credit offerings that are based on your credit profile. Along with Credit Karma, they will also monitor and provide insights on your credit profile.
When To Review Your Credit
There is never a wrong time to review your credit report and scores. As mentioned earlier, you can only pull your full credit report from each of the reporting credit bureaus free once a year. However, if you want to pay for a report, you can request them anytime. Most credit bureaus release updates monthly which means that each month your credit report or score can change. Ideally checking your credit score and report through a free service like Credit Karma or Credit Sesame once a month is going to give you the most beneficial information. However, when using these free services you can check your credit score every day if that is what you need to take control of your finances. Bottom line is you should be checking your credit report and score whether that is once a year or everyday!
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- 4 Money Concepts To Know To Take Control Of Your Money
Have you checked your credit report or score recently? What is holding you back from reviewing your credit report and credit scores?
This article was such a great reminder to remain aware of what’s on your report. I think we sometimes have the “set it and forget it” mentality when it comes to credit. We pay the bills on time and don’t bother with the report unless we want to apply for credit.
Hi KJ. I have to agree with you that many many individuals do not worry about their credit report until they want credit. While many times that might be okay, I have found that the more consistent you are at keeping track of your credit report the faster you can get issues solved. Thank you for your feedback.
I found this post to be very important. Most people don’t even want to look at their credit score because they fear how bad it could be. But, I find this to be very essential in our lives. If we don’t check it, we won’t know what we need to do to increase it. I liked this post and hope you continue to push out more important topics suchas this one.
Thank you, Roland! I agree that many do not check their credit score. I have also found that I have many friends who check their credit score, but never actually review their full report! I feel like there are many important financial topics that schools, parents, friends, and society do not talk about. I hope that I can keep sharing my experience.
Setting a time for reviewing the credit reports and scores are very important. It provides a lot of information to take control of the finances. My Dad is the one who generally takes care of all this.
I agree that reviewing credit reports and scores can provide a lot of great information. Does your dad take the opportunity to also teach you even though he is the one who generally takes care of it right now?
Totally agree with you, keeping up on your credit reports and scores is really important! It is definitely something that I wish I had listened to my parents about when I was younger. Thanks for the reminder!
Thanks Kat! It is never to late to start keeping check of your credit reports and scores. There are many things I wish I would have listened to my parents on when I was younger as well. We live and we learn, right!
Well I have some loans with their outstanding balances. More new loans? One of my 2018 resolutions is get rid of new loans 🙂
I do regularly review my credit. I was forced into bankruptcy by an evil ex some years ago, so I’m in the process of rebuilding it. Keeping an eye on it is important!