Credit reports are incredibly important to our daily lives, whether we realize it or not. But far too many people do not regularly check their reports, and it can have negative effects on their financial wellbeing. Whether you want to buy a home, refinance a vehicle, or take out a new credit card, your credit score can make all the difference.
Today we are talking about credit reports and why they are so important.
Before we get into why checking your credit report is so important, let’s first talk about what a credit report is.
A credit report is a detailed account of a person’s financial history. It may include some of the following:
Credit scores are calculated using the information in your credit report. A credit score is a number between 300–850 that is calculated to depict a consumer's creditworthiness. The higher the score, the better.
Credit reports (which result in credit scores) are incredibly important for our financial wellbeing. That’s why it’s important to check your credit report to make sure that you get the best financial opportunities possible.
Let’s take a closer look into why checking your credit report is so important.
Checking your credit will alert you to any mistakes that may have been reported. Whether it’s a missed payment, late payment, or incorrect amount, these mistakes can chip away at your credit score.
A study by the Federal Trade Commission found that 25% of people who regularly checked their credit reports found errors that affected their scores.
Your report may even contain other people’s information, which is known as a mixed file. In this case someone else’s financial issues may directly impact your credit report.
If you notice any mistakes or errors, it may take weeks if not months to sort out. Once you report an issue, the credit agency has 30 days to respond. The sooner you notice any issues, the sooner they can be amended and your score can be fixed.
Checking your report will also help you determine if anyone has taken out any accounts in your name. If someone has made inquiries using your Social Security Number, it will appear on your credit report. Catching these issues early is key – the earlier you report this, the quicker the accounts can be canceled and your report can be repaired. The following warning signs may alert you to a fraud issue:
If you do catch any fraudulent activity, be sure to contact the appropriate lenders as soon as possible and alert them to the situation.
A good and accurate credit report means that you will have a good and accurate credit score. And having a good credit score is good for a number of reasons:
So what’s considered a good credit score? The following brackets can help you decide how your creditworthiness is ranked:
The top rates are reserved for those with excellent credit and very good credit. The lower your score dips, the higher your interest rates will climb. All of this adds up to you saving money in the long run. Having a good credit score can help you secure a low car loan APR when you refinance your car loan. Better interest rates and payment terms can add up big over time. So it is vitally important to stay on top of your credit report and work to improve a bad credit score.
The Fair and Accurate Credit Transactions Act of 2003 made it possible for you to check your report at each of the three major credit agencies – Experian, Transunion, and Equifax – for free once per year. This means that you have three opportunities every year to get a free credit report. Pulling your own report takes about ten minutes and is super easy for anyone to do. And despite what you may have heard, pulling your report does NOT hurt your credit.
In addition to checking your credit report three times a year, you should routinely monitor your credit score. This will help alert you to any issues that may be worth inquiring about.
By catching mistakes and errors you can help your credit score a whole lot. And a healthy credit score means that you can qualify for a low car loan APR when you refinance your car with Auto Approve. Get a free quote today and find out just how much you can save!