Why it is so important to check your credit score annually

Most of us know little or nothing about our current credit rating or credit score. The only time we know there is something wrong is when credit applications or lease applications are denied. The truth is, it is critical that every single person knows everything about your credit rating and what is in their file. If you don’t know this information it will only lead to bad things in the future. So if you are planning to borrow money, apply for a mortgage or leasing a car, you need to request your credit report today to see what information is on it.

What is your credit file and how did the information get there?

Each time you apply for credit either through a credit card company or if you apply for a mortgage, buy new furniture on the don’t pay for 5 years plan, financial institutions, lending companies and credit card companies send the information about the transaction to the credit reporting agencies. Credit reporting agencies are in the business of collecting and storing this data that will and can be accessed by other companies at a future date. This credit file contains all the information about your credit activities that companies have send in.

So why do you need to review your credit report annually? Because companies who submit credit information about you or someone in your family make mistakes. This misinformation or simply put, wrong information could be very damaging to your personal credit rating and can seriously impact your ability to borrow money or get credit approval.

Another important reason to keep in mind is the rising rate of identity theft. Ever day in North America hundreds if not thousands of people become the victims of identity theft. The problem is, these people often don’t know they are a victim for months, possibly years before the real damage is done. People’s credit ratings and scores are virtually destroyed by someone who has stolen their identity. In some cases, it can take years to clean up your credit rating if you have been the victim of identity theft. This is quickly becoming the number one reason why people should check their credit ratings on a regular basis.

How to obtain a free credit report:

You can obtain your free credit report 2 ways. You can either submit a request form or you can call credit collection agencies directly. These companies will then issue via mail your free credit report.

Is a free online credit report available?

Yes. However, it may not be a complete report. There are a number of companies that will try and offer a free online credit report. There may be a small fee but you will be able to access your information quickly versus waiting for it in the mail. Remember, be sure you are dealing with a reputable company that is recognized in the industry when giving out personal information over the phone for your credit report.

Credit Report Score:

Every item of credit history is given a score or rating by the credit grantor. The most commonly used ratings in North America are the R ratings. The R stands for revolving credit and you can score from an R1 (you always pay on time) to an R9 (bad credit). If you have a number of R9 ratings on your credit report score, this would indicate to a lender that you are of high risk. They may still decide to lend to you, but expect a higher interest rate than if you had a very good credit score.

The most important thing you can do is clean up your bad credit scores quickly. Lenders want to lend their money out or extend your credit. If they can see a positive trend in your score, they will be more eager to lend to you than if they don’t. Just remember, be honest with the bank and show them that you are attempting to clean things up. If you try to hide your bad credit, this will likely result in them declining your application.