Experts admonish you to change the batteries in your smoke detectors every six months. This necessary precaution often falls through the cracks, sometimes with devastating results. Reviewing your credit reports often is a lot like checking the batteries in your smoke detector. Doing it often can help you “fireproof” your financial house.
A low credit score or mistake on your credit report won’t burn your house down, but it can costs you thousands of dollars and many financial headaches. It addition to raising the cost of a loan, a low score can also keep you from getting the job or housing you want or affect your insurance rates.
Here are 3 reasons from Creditrepair.com why all consumers should be conscientious about checking their credit reports at least once a year.
1. Credit Report Errors are Surprisingly Common
One in five consumers has an error on at least one of their reports from the three major credit reporting agencies: Experian, TransUnion, and Equifax, according to a 2013 study by the Federal Trade Commission. Most errors are the result of simple data entry, even though identity theft continues to grow.
“Everybody should be routinely pulling their credit reports to make sure that everything on their credit reports is accurate,” says Scott Smith, president of Creditrepair.com, a Salt Lake City-based company that has been helping people resolve credit disputes for 20 years. “It’s really amazing how many inaccuracies are out there.”
In the case of identity theft, Smith advises to contact your bank or financial institution as quickly as possible to head off financial fires.
2. It’s easy and it’s free, courtesy of the FTC
Everyone can request a free copy of their credit report every 12 months from each credit reporting agency, under federal law. This is to ensure that your report is current and accurate. Personal finance experts recommend reviewing all three reports annually, whether you check them all at once or stagger them throughout the year.
There are many sites that offer the service of accessing your credit report for free, however, the only site authorized and maintained by the Federal Trade Commission is annualcreditreport.com. Take precaution, however, because the government warns consumers of many imposter sites with similar names.
3. A Good Credit Score can Save you Thousands of Dollars
The difference between a fair credit score of 680 and a good score of 720 or above could mean an extra half percent of interest on a mortgage rate. On a $200,000, 30-year-fixed mortgage, that could cost a homeowner about $20,000 in additional interested over the life of the loan. For car buyers, even a few extra percentage points on an interest rate can cost you thousands of dollars in finance charges over five years.
Reviewing your reports for inaccuracies is the first-step in making sure that your finances are in order. Experts advise figuring out your actual credit score if you plan on securing a loan in the future.
Your FICO score is a game-changer for anyone pursuing a loan. FICO is marketed by Fair Isaac Corp. and is used by the bulk of lenders. Your FICO score is available for free through many credit card companies, banks, or credit unions. It’s important to check with your financial institution, however, you can always purchase the score for $19.95 from myfico.com.
For more tips on how to improve your credit score, please visit creditrepair.com.