7 Reasons to Clean-up your Credit Report
Like your home, it’s a good idea to seasonally “deep-clean” your credit history… clean everything that is dirty, fix what’s broken, and polish what you have. By signing up for a credit monitoring service and utilizing your free yearly credit report (www.annualcreditreport.com), you can protect yourself from identity theft, adjust your budgeting to pay down debt, and make financial goals for the future. Four times a year (and anytime in-between), sit down, grab a cup of coffee, and review your financial situation. When “cleaning” don’t worry about the score, focus on your history. Credit scores are a direct reflection of your history, if you tidy up your report, the good score will come. Instead of waiting for a “clean slate,” clean it yourself!
Know what you owe. It’s easy to forget the little things or let balances get out of control. Add up your current debt and set some goals! Think about where you want to be the next time you “clean” and make a reasonable list of steps to get you there. If you are looking to pay down your debt fast without sacrificing your budget, check out www.powerpay.org for safe assistance with rapid debt repayment. This is also a good time to look at the types of credit you own. Do you have multiple types of accounts or is it all unsecured debt? Having too much of one type such as credit cards, can harm your score more than build it. Always try to have a diverse mix of accounts such as credit lines, secured (loans with collateral) and unsecured loans.
Make yourself less risky for lenders.
Credit scores and histories can impact your ability to get loans regardless of how long you have been with your financial institution. If you are looking at your report and you see some old collections, get rid of them! You may not be financially able to pay them all off at once, but call the collectors and set up REASONABLE payment plans. If the monthly payment proposed to you by the collector will not work for you, say something! If you break an agreement with the agency, they may be less willing to work with you regarding the terms of your debt in the future. Once you have paid collections, watch to see that they are listed as “paid” on your report. Some collectors may even remove the collection completely, it doesn’t hurt to ask!
Get the best loan rates and terms.
Credit reports don’t just determine IF you get a loan, they impact your loan agreement in more ways than one. Having a good credit history can get you a better interest rate, longer term, even a lower down payment. With a poor score, your terms may be limited and you could be asked to find a cosigner. No matter your current credit situation, always compare reputable financial institutions for the best loan rates and terms that fit your needs.
Look great to future employers and landlords.
Many businesses and rental companies require a credit check before any contracts are offered or leases are signed. Most are not looking for a number, instead they are looking at what exactly caused your credit score. You may seem like a less than desirable applicant if you have multiple collections and late payments on your credit cards.
Lock in the best possible rates for services.
Most people think loans are the only accounts impacted by your credit history. Actually, necessary services such as insurance, cell-phone plans, etc. may cost you more due to a poor credit score. Once you have fixed some of your credit woes, check back with your agent or provider to see if another credit pull is necessary to secure lower payments.
Stop fraud before it starts (or gets out of hand).
When looking at your full credit report, look for discrepancies on your personal information. This could mean that someone has been trying to apply for credit or services under your name. Something as simple as a wrong birthdate or address may indicate attempted identity theft. Work your way through your report looking for accounts, balances, and authorized signers on accounts that you did not initiate or authorize. If you find suspicious activity, contact lending institution and all three major credit bureaus, Equifax, Transunion, and Experian. By doing so, you can put an alert on your account to alert all lenders of past fraud.
A healthy credit history usually leads to stable finances.
By handling and examining your finances regularly, you are better able to reach your short and long-term money goals. You can’t know where you’re going without knowing where you have been! To keep yourself motivated, figure out where you want your money to take you. Do you want a family vacation? To retire early? A new car? Establish an emergency savings account? The sky is the limit and the world is your oyster!