Money Monday: Why You Need To Get Your FREE Credit Report

BY: - 24 Dec '12 | Money

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Your credit report is one of your most important financial documents, affecting everything from how much you pay for a mortgage to whether or not you can even be hired for certain jobs.

Yet, according to a recent investigation, as few as one in five people haven’t even bothered to check their credit report, even though a credit report can be obtained absolutely free.

What exactly is your credit report? It’s a file containing your identification and employment history along with the payment history you have with various creditors. Included in the report is also a list of accounts in collection as well as public record information like bankruptcies, foreclosures, and tax liens.

From this information your all important credit score is derived. Your credit score is, in turn, used to determine whether you qualify for a mortgage, auto loan, private student loan, or credit card. It also determines the interest rates you’ll pay on these loans.

But, it’s not just loans that are affected by your credit report and the credit score derived from it. According to the New York Times, about 60 percent of employers now perform credit checks on job applicants. A low credit score could easily dampen your job prospects. And in some industries, like banking, a low credit score could totally disqualify you from certain positions.

In addition, your credit score is used by insurers to determine how much you’ll pay for car insurance and many landlords will refuse to rent you an apartment based on your credit score. Banks can even use the information to help determine if you’re eligible to open a checking account.

With the financial stakes so high it’s amazing then that nearly 80% of all credit reports contain errors, with 25% containing errors significant enough that it could deny individuals access to credit.

Even personal finance experts aren’t immune from credit report errors. Take, for instance, the experience of Washington Post personal finance expert Michelle Singletary:

A storage company claimed I owed them money. I contacted the credit bureau (the company had reported the damaging data only to one bureau) and disputed the information. The bureau then asked the company that reported the information to verify the debt. What do you think the storage company did?

They reported back the same wrong information, reducing my credit score by about 100 points. I know this because my other two credit reports, which did not contain the incorrect information, produced higher credit scores. The major difference in the three reports was the erroneous overdue debt.

After the so-called investigation, the incorrect information was again listed in my file. I complained again. After a few rounds of this nonsense, I finally was able to get the inaccurate information removed.

It’s crucial to check your credit report before you need to apply for a loan, as it can take months for the credit reporting agencies to remove inaccurate information that could cause you to get rejected or pay a higher interest rate. In addition, checking your credit report is one of the best ways to protect yourself against identity theft.

By law you’re allowed to get a free copy of your credit report from each of the major credit reporting agencies, Equifax, Experian, and TransUnion. Be careful though. You’ll want to avoid those commercial websites that offer you a “free credit report” but in the process trick you into signing up for expensive and unnecessary services like “credit monitoring”.

Remember, you can get free, no strings attached, credit reports by visiting annualcreditreport.com. This is the only federally approved location for obtaining free credit report information from the big three credit reporting agencies.

My best advice is not to request your Equifax, Experian, and TransUnion credit report from annualcreditreport.com all at the same time, but space it out by ordering a free report from a different credit reporting agency every four months. This allows you to monitor any suspicious activity or inaccurate information throughout the year.

2013 is the perfect time to make a New Year’s resolution to get your hands on one of the most important documents of your financial life.

BMWK, when is the last time you checked your credit report?

About the author

Alonzo Peters wrote 260 articles on this blog.

Alonzo Peters is founder of MochaMoney.com, a personal finance website dedicated to helping Black America achieve financial independence.

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12 WordPress comments on “Money Monday: Why You Need To Get Your FREE Credit Report

  1. Cheryl Pope

    This is a great post. I’ve been getting my credit report in January for the past 3 years. I like to find out if there is anything negative on it since I was a victim of identity theft about 11 years ago. Happy to report my credit score has improved in the past two years with the purchase/financing of my car.

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Money Monday: Would You Dump Someone With A Bad Credit Score

BY: - 31 Dec '12 | Money

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Photo Credit: Casey Serin

Photo Credit: Casey Serin

It was the perfect date, or so Jessica LaShawn thought. As she tells the New York Times, he was from a religious family, raised by his grandmother, and had a good job. The evening was going by wonderfully until he popped the question, “What’s your credit score?”

“It was as if the music stopped. It was really awkward because he kept telling me that I was the perfect girl for him, but that a low credit score was his deal-breaker,” Le Shawn recounted to the Times.

To add insult to injury, days after the disastrous date, Jessica received an apologetic text message reiterated that the problem the wasn’t her, but her credit score.

Of course it’s important to get to know a little bit about someone while dating, but asking for a credit score on the first date, is it me or does that just seem a bit tacky? Why not cover all the bases and make the interview complete before the waiter arrives with the final check?

“Hey, could you also provide me with your resume, BMI, hip to waist ratio, number of sexual partners, and ten years worth of medical records? And while you’re at it, throw in your social security number so I can do a complete background check on you as well.”

Twenty-five year old Josephine La Bella broaches the subject of credit scores soon after meeting someone. “I take my credit score seriously and so my date can take me seriously,” she told the New York Times.

Apparently the emphasis Ms. La Belle places on the credit score isn’t unique. Even Suze Orman suggested on Oprah that, “Before you get involved in a relationship or anything, FICO first, then sex,” referring to the ubiquitous FICO credit score.

According to New York Times interviews of 50 daters across the country, credit scores have become a bigger factor in dating decisions, sometimes eclipsing more traditional priorities like a good job, shared interests and physical chemistry.

Now you have to admit, 50 daters isn’t a big sample size, but it is something to consider that in today’s dating scene, apparently asking about a credit score is gaining the same importance as inquiring about STDs, baby-mama drama, and possible jail time served in the past.

And you can see why asking for a credit score makes sense. A poor credit score, for instance, could hamper a couple’s ability to purchase a car or home.

A poor credit score is often considered a sign of bad decision making. Employers seem to think so, as do insurance companies who base their employment decisions and insurance rates on credit scores. If a person is irresponsible with their money, how responsible are they going to be in a marriage, a potential spouse argues?

Some even claim the divorce rate is so high because we don’t properly vet our potential mates. We let emotions rule logical investigation. Why not do a little investigation into a potential mate first?

But let’s be realistic, bad credit scores happen to good people. Unexpected job losses, medical catastrophes, and crushing student debts hamper even the most conscientious among us.

And while it is crucial to learning as much as possible about a potential partner before saying “I Do,” automatically cutting and running on a date with a 540 credit score may not be the best strategy for finding Mr. or Mrs. Right.

BMWK: Do you think asking for a credit score is necessary in today’s dating scene? If so, when should the topic be brought up? At what point in your relationship did you ask your spouse about finances, STDs, potential jail sentences, and other sensitive topics?

About the author

Alonzo Peters wrote 260 articles on this blog.

Alonzo Peters is founder of MochaMoney.com, a personal finance website dedicated to helping Black America achieve financial independence.

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