For most of the country, winter appears to be making its exit. Spring cleaning season is arriving. In addition to spring cleaning your home, you need to spring clean your credit report.
Your Credit Score is Your Entrance Ticket
We’ve spoken before on this blog about the importance of your credit score. It is your entrance key to so many doors. Spring and summer are popular times to make financial moves, such as buying a car or home or moving to a new location. Sometimes the spring bug gets us motivated to launch our entrepreneurial dreams, necessitating some home renovation.
But even outside of these situations, your credit score is the deciding factor in many areas, including employment and rentals. Your credit score will make a huge difference in your total mortgage costs, the interest rate offered, and the loan terms on that new auto you have your eyes on. Even service providers such as mobile phone companies and utility companies check your credit report.
Consumers are not Checking Their Credit Reports
If you are not in the habit of routinely checking your credit report, you are not alone. Creditcards.com reported that half of the consumers reported that they have not checked their credit report even after the Equifax breach. Further, it says that 1 in 5 has never checked their credit report even once!
We cannot over-emphasize how important it is to make sure your credit report is accurate. In addition to the many data breaches that have happened lately, errors do happen. Creditors and the reporting agencies can both make mistakes, and this could cost you.
It is much better to take some time now and spring clean your credit report rather than apply for financing and deal with the shock of rejection. When we spring clean our homes, we find the most surprising things. When you spring clean your credit report, you might also find some surprising things. And, these surprises may not be fun.
Here is how to spring clean your credit report.
- Take full advantage of your rights to a free credit report. You are entitled to one free credit report each year from each of the three credit reporting agencies: Experian, Equifax, and TransUnion. Alternate the agencies so that you are checking your report at least three times a year.
- Start at the top. Carefully check your personal details. Is the social security number correct? What about your address and other contact information? Birthdate? Is your employment history accurate?
- Examine all the credit accounts that are listed. Do they all belong to you? Do any look unfamiliar? If so this could be evidence that your account has been hacked. Are there accounts that you closed but are still showing as open?
- Payment history. Your payment history is a major factor in determining your credit score. It makes up 35% of your credit score. If you consistently pay your bills late or skip payments you will lower your credit score. Your payment history is also used by landlords and employers as an indication of your reliability and character. If your credit report reflects late payments but you always pay your bills on time, you need to get in touch with your creditors and the reporting agency to correct this.
- Credit Utilization. In a previous blog post, we talked about credit card utilization. This is the ratio between the total credit available on your credit card versus how much of that credit you are using. It needs to be around 30 percent. If it goes above 30%, your credit score will start to fall. As a general rule, you should keep your eye on this for all of your credit card accounts. You could have a great record of paying your bills on time and find your application for financing rejected. This will most likely be the reason. Be sure to check the information provided regarding your credit utilization for accuracy and correct any errors.
- Vigilance and Assertiveness. Stay on top of your credit reports. It doesn’t cost anything to pull the reports but it can cost you a lot if there is incorrect information in the report, or your score is lower than you think. Once you have your report, do not be shy about getting in touch with creditors and the reporting agencies if you find errors. Report the errors and stay vigilant until the corrections have been made.
