Most people have easy access to their credit scores. Mine is available on my credit card statements each month and from my banks. People are less likely to look at their credit report, especially if their credit score is good or excellent. However, it is a good idea to review your report occasionally. Here’s why.
- Check for identity theft. If someone has gotten access to your personal information, they may have applied for a loan or credit card in your name. You need to review your report periodically for any accounts that you are unaware of. One of my credit card companies checks this for me and notifies me each month as to whether any new accounts have been open in my name. You may want to check with your credit card company to see if that service is available to you.
- Check for errors. Credit card companies process more than a billion transactions each day. They are going to make some mistakes. The sooner you catch a mistake, the sooner it can be corrected and the less likely it will negatively impact your credit score. Additionally, some lenders may fail to report closed accounts or debts that have been paid in full, so you will want to check for those type of errors, as well.
- Learn why your credit score is not higher. I spoke with a lady recently who told me her credit score was 580. That is on the cusp between Poor and Fair. She could not understand why it was so low, as she said she had no debt other than her home mortgage and a loan on one of her four family vehicles. We pulled her Experian credit report, which told a very different story. The woman had seven accounts that were flagged as Potentially Negative. Each of them was small debt that she had not paid and did not realize that she owed. It was immediately obvious why her score is so law.
- Make a plan to improve your score. The seven debts that the lady had not paid have all been sent to collections. She needs to take care of each of these. Her plan is to (1) contact each creditor to verify that the bill is correct, and (2) pay each debt that is truly owed. In her case, one debt was for about $350 and the other 6 were approximately $100 each. She can pay off all seven bills for less than $1,000. She should see a significant increase in her credit score in 30 – 45 days.
In the case of the lady I spoke with, her credit score was quite low due to unpaid debts totaling less than $1,000. She can easily pay all of these bills, once she verifies they are accurate. In other instances, however, someone may have no debts that have gone to collection, yet still have a low credit score. This could be due to a pattern of paying bills late, opening too many new accounts in a short period of time, or having too much debt in relation to your maximum. It is difficult to assess why your score is low and make a plan to improve it without reviewing your credit report.
Everyone is entitled to a free copy of their credit report once a year from each of the three major credit rating agencies. Some financial experts recommend checking all three at the same time each year and comparing them, while other experts recommend spacing them out during the year. The lady I worked with pulled her Experian report last week. She will take care of each of the debts and allow 45 days for her records to be updated. Then she will get one from either TransUnion or Equifax to verify that the debts have been removed, and later in the year she will get the third one to ensure that she is staying on track with all of her open account.
To access your free credit report, go to annualcreditreport.com
If you need help to learn to manage your money and improve your credit, please check out some of my other blogs on Finances, Money Management, and Stewardship. My book Honoring God with Your Money is a great tool for financial money management.
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