Why You Should Check Your Credit Report

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If you have not figured it out by now, your credit history is extremely important. Credit has transformed from something financial institutions used to determine if you can be trusted with their money, into something everyone else uses to assess your character. Here are some (unexpected) uses of your credit report:

  • Insurance Companies: They are now checking your credit report to determine what your risk appetite is. They’re also using it as a character assessment tool which they use to influence your premiums, however small. While the use of this varies from company to company, chances are you won’t know until it’s too late.
  • Current Creditors: We expect people we are requesting loans from to check our credit reports. What we don’t anticipate is someone who already claimed to have trusted us to check in after a financial commitment has been made. However, they’re definitely looking in on us. They use information to determine if there have been any additional debt added and what our behavior has been (i.e. delinquency at other financial institutions). The uses of this information will depend on what they find. It could be used as a marketing tool (additional offers) for good behavior or a punitive tool (credit card interest rate goes up or credit limit gets inexplicably reduced) when they detect potential issues.
  • Jobs: I don’t know if this is a product of the millennial generation being over educated for open positions, or a result of the recession that flooded the market with unemployed people looking to fill very few slots, but it appears that companies are really going out of their way to reduce the pool of candidates. In the 9 years I’ve been out of college I have never been a candidate for a position that did not require a credit check, other than retail. The requirements were always: background check, references, credit check and drug test. References and drug testing were not always required, but background checks and credit checks were always consistent.

With all these parties reviewing or requesting your credit report for purposes other than borrowing and/or large purchases, why would you want to risk not being fully aware of any adverse information that might show up? The sooner you find something negative, the better you can respond, either to defend yourself or to take corrective action. Here are the reasons why you should check your credit report regularly:

  • Time sensitive: Changes to your credit report happen relatively quickly. All it takes is 30 days for a bad payment to show up on your account and it’s there for 7 years. Your score, your history and your risk profile can change very fast as a result of 1 negative data. The sooner you are aware, the faster you can address it.
  • Mistakes: Some of us have common names, others are simply victims of a fast typist who transposed a few digits on the social security section of a form. Either way, errors on your credit reports are actually not rare and can lead to having your character brought into question, while it’s really the OTHER Erica Smith who is a total crook and won’t pay her credit card bills.
  • Identity Theft: How would you feel if you worked really hard to build your credit for 3 years to buy a car only to realize you’re already overdue a very expensive car loan but you don’t have a fancy ride? Picture this… someone steals your identity, takes a loan under your name, rerouting the mail to a different address so you never got the mail. They have also conveniently not made a single payment since they drove off the lot. This is the worst kind of mistake you can have on your report. Because you’re not just proving they have the wrong social security number, which is easily verifiable. You have to prove that someone who tried really hard to pretend they are you, were not actually you. You’re stuck clearing your name, proving that you are not responsible for these purchases or credits and you aren’t a con artist looking to get one over on your creditors.
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