This post was provided by a contributor to our Financial Literacy Movement partner Quizzle.com.
I always fancied myself a smart guy in personal finance, but credit scores were always a little mysterious. I knew they controlled my life; getting a new credit card, car loan and later, a mortgage was always filled with anxiety. I thought I was pretty good with money, but I never knew what was on that stupid credit report they were pulling. That always made me a little nervous.
Today, I know how crazy it is to be nervous about my credit report and score. Here’s how I learned to stop fearing my credit score and start loving life.
1. Checking Your Credit Report and Score Never Hurts You
This really was the big stumbling block. I, like many Americans, thought that checking my credit report hurt my credit score. Turns out that is completely bogus.
In fact, the government fundamentally wants to protect your right to check your credit. They get the fact that your credit report controls so much of your life from getting loans to getting jobs. That’s why they passed the Fair Credit Reporting Act to make sure you can check your credit report as often as you like to make sure creditors are reporting your credit behavior accurately.
This is so important that they went one step further and made the credit bureaus give you one credit report a year free. Get yours at AnnualCreditReport.com.
2. Mistakes Happen (More Than You Think)
The most recent survey of credit reports revealed that over 19 percent have reporting errors. More importantly, nearly 1 percent have errors that when corrected, increase the consumer’s credit score by 20 points or more. That might seem like a small percentage, until it happens to be your credit report!
Why would you take a chance? Reducing your credit score by 20 points could be the difference between excellent credit and “Sorry, you’re credit application has been disapproved.”
Personally, I have found incorrect addresses, employers and most significantly, a new account that I never opened. The easy availability of free credit reports and scores make this a silly risk to take — check your credit report today.
3. It’s Usually Not That Bad
This is another biggie. Lots of folks are afraid to check their credit because they think it’s bad. Most of the time they’re pleasantly surprised.
Most think their credit is worse than it is because they think credit bureaus know everything about your personal finances. Here are just a few things that you might think credit bureaus are tracking that they aren’t: Your age, how much you make, what’s in your savings account, most of your medical bills, your rent payments and more.
Turns out my credit is pretty darn good. Once I checked, and continue to check regularly, I never fear it.
4. Bad Credit Doesn’t Fix Itself
Here’s the biggest problem with being afraid to check your credit report:
Bad credit doesn’t fix itself!
Avoid your credit report and score is only going to hurt you. You need to know what creditors are reporting about your credit behavior. You need to know what is helping you and what is hurting you.
So what if you have a few blemishes? If you know about them you can start getting them fixed. The faster you start, the faster you can rebuild your credit to a score that makes you proud.
5. Building Better Credit Isn’t That Hard
I’ll let you in on a little secret I discovered when I took control of my credit — it’s not that hard to improve!
Credit scores are typically only driven by a few factors:
- How well you pay your bills over time
- What you owe compared to how much credit you have
- How long you’ve been managing credit
- How much and how often you’re trying to get new credit
- The different types of credit you use
Improving credit simply means you need to work diligently on paying your bills on time, using only a small portion of your available credit, do that well over time and only get new credit as you need it.
Make Your Credit Report Less Scary
Checking your credit report shouldn’t be scary, it’s your right. Because I took this first step I now walk into creditors with confidence and even use my good credit as a bargaining chip.
I’ll admit that reviewing your credit report and score for the first time can be a little scary, but this is where our partner Quizzle.com can help. Their interactive credit report is full of consumer friendly information and notes. And if after reviewing your free credit report it looks like you need help cleaning up some bad stuff, enroll in the Quizzle Improvement Program.
Why haven’t you checked your credit report? I really am curious. Leave a comment.
This article is part of the Go Banking Rates Financial Literacy Movement, helping Americans get smarter and grow richer. Take our Credit Score Connoisseur quiz to test how knowledgeable you are!