Manage Your Credit History

Manage Credit WiselyA good credit report, generally considered to be a score above 700, can be a valuable asset. Most significantly, with a better credit score you can get superior interest rates on house or car loans.

Unfortunately, it is estimated that about 60% of information found on credit reports is either incorrect, outdated, or both.

Considering that even the most seemingly insignificant errors can result in you paying a higher interest rate or cause you to be denied a loan completely, it is in your best interest to ensure that you check your credit report regularly for completeness and accuracy. Visit annualcreditreport. This central site allows you to request a free credit report once every 12 months from each of the nationwide consumer credit reporting companies.

Once you receive your credit reports from the three consumer credit reporting companies – Experian™, Equifax®, and TransUnion® – start by checking your personal information such as Social Security number, the spelling of your name, current address, previous addresses, and date of birth for completeness and accuracy.

FICO Score - Meter

Next, check your credit history. Ensure that the information (e.g. balance, credit limit, etc.) associated with each account is accurate and up to date.

Check the status of your accounts. As examples, accounts that are “closed” or a loan that is “paid in full” should clearly be reflected on your report; and should show a zero balance.

Negative remarks can be incredibly damaging. Look for words or phrases like “collection” or “charged-off” or statements indicating that a payment is late. If the information is not accurate, dispute the entry immediately and seek to have it removed or updated.

Next, check public record information. If your report shows a foreclosure, bankruptcy, tax lien or court judgment, ensure the information associated with the action is accurate. If it is not accurate, dispute the entry.

Finally, check for any negative entries and their dates. Generally, negative information should be removed after seven years. If the information is older than seven years, take steps to have it removed. Each of the credit bureaus outlines how to go about disputing entries on their respective websites.

 

Blogger-in-Chief here at RetirementSavvy and author of Sin City Greed, Cream City Hustle and RENDEZVOUS WITH RETIREMENT: A Guide to Getting Fiscally Fit.

12 Comments

  1. Pingback: Buying a Home
  2. Excellent article! I learned this when buying my first house. Luckily when I first started looking for a house our realtor had told us that we should pull a credit report and check to make sure everything was squared away. We found several errors and had them corrected prior to applying for a loan. We saved money on the interest rate by cleaning it up.

    • A great practical example of the value of managing your report. Thanks for sharing, my friend.

  3. Great post. It’s helpful to know what we should be looking for. As you point out, people may be requesting their credit reports but not knowing exactly what to look for. I would add that the credit report is a good way to find out what lines of credit you have open and then start closing them. Quite a few years ago, I was surprised to see so many open lines of credit on my report from department stores or furniture stores where we opened an account to save on a particular purchase. I was able to call each one up and cancel them.

    • Great point with regards to closing credit lines that are no longer needed/required.

  4. This is very good information. As a victim of identity theft I know from experience how much a negative credit score can affect daily life and future financial goals. One important thing I’d add is the necessity of 24/7 credit monitoring. I have a membership with a company that sends me a monthly summary on my credit report. So on a monthly basis I get to see if my credit card reported late payments, over limit status etc. This comes from all three credit reporting agencies. Also if a new account is opened in my name I’ll be contacted by phone or email within 24 hours. If someone bought a boat in your name it would be better to know tomorrow than six months or a year from now. I know you’d agree.
    Really great blog as usual.

Leave a Reply

Your email address will not be published. Required fields are marked *