You apply for a loan and soon someone from the lending institution calls you to tell you that they are unable to assist you with a loan at this time due to your poor credit rating. You're shocked to hear that your credit rating is not good. You pay your bills on time each month and you make more than your minimum payment on all of your credit cards. How could your credit rating be low? You question the person on the other end of the phone and they begin to go over your credit report with you. Your pulse quickens and you start to panic, those delinquencies and collection accounts are not yours! You begin to think that you must be a victim of identity theft. Are you really a victim of identity theft or is someone else's credit mixed in with your report?
The fact is that 85% of all credit reports contain errors. These errors can range from minor things like your birth date being incorrect to more serious issues like the story above. All information on your credit report affects your credit score. Even if someone else's credit is showing on your report and they are paying that bill right now, there is no guarantee that in 2 months from now that they won't be delinquent on that loan. The goal of every person should be to have an accurate credit report reflecting only their debts.
Do you think that your credit score really doesn't matter? Do you think that your credit score only affects your ability to get a decent rate on a loan? If you believe this you are mistaken, your credit score affects so much more than just the interest rate you get on your loans or your ability to get a loan.
For example, did you know that your credit score affects your automobile and homeowners insurance rates? It most certainly does. Insurance companies now not only look at your driving record, the distance you travel on a daily basis and the type of vehicle you are insuring but at your credit score as well to determine your premium. Your low credit score could be costing you up to hundreds of dollars each year in higher premiums. Still think that your credit score doesn't really matter?
With all that is going on in the lending realm today, your credit score is more important now than it has ever been. For the past few years, your ability to gain credit has been easy even with less than a perfect credit history; however, that is changing rapidly in the lending world today. Lenders are starting to look deeper at a person's credit history and credit score. Loans that a year ago would have been approved quickly and easily are now often looked at with much more scrutiny and possibly denied because the borrower's credit score is too low. The default rates on loans across the nation are staggering and lenders are starting to restrict their lending to people with higher credit scores.
Identity theft is a real threat to everyone's credit history but errors on your credit report can adversely affect your credit just as much as identity theft. Both of these issues can destroy your credit history and take months and even years to correct. Catching both cases early can save you a lot of headaches and hassles! Monitoring your credit history on a yearly basis can definitely keep you in touch with what is being reflected on your credit report. There are some great companies out there that offer extra "protection" against identity theft but they can't stop the errors that can be reflected on your report. The best level of protection against errors on your report is YOUR diligence!
Don't be like the person in the story above! Know what is in your credit history and make sure that it's accurate. Your credit can be one of your most valuable assets and one of the greatest investments of your time!
Joanna Murphy is Certified in Bankruptcy and is a Certified Financial Counselor by the Credit Union National Association. Her company, New England Credit Consultants is the ONLY licensed and bonded credit repair agency in the State of Maine. For more information about NECC and to read other articles about Financial Fitness, please visit http://www.necreditconsultants.com.
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