Regularly checking your Credit Report is important to do if you are looking at requiring any form of credit in the future.
If you are looking to get a mortgage, loan, credit card, mobile phone, vehicle insurance or even rent – your credit report can affect the likelihood of you getting the required credit.
Checking your credit report will also help you gain a better understanding of your financial history and shows areas that require improvement. You can make sure that this information is fed into your Financial Forecast too.
What is a Credit Report?
A credit report is basically a record of all of your financial history of your debt. It shows both open and closed accounts and balances of debt you have had, and how you repaid them. It also includes your personal details and address history, and also a list of the searches you and others have made on it.
Each lender may use your credit report to help them make a decision as to whether to give you credit or not. They will each have their own way of analysing your credit report and so therefore there are no guarantees when applying for credit.
There are 3 main National Credit Bureaus: Equifax, Experian and TransUnion. These bureaus are where lenders report your financial information to and each compile your data into your report. The issue is that different lenders may not send details to every one of them, which can potentially leave gaps.
Accounts are generally kept on your report for 6 years after the closure of an account, whilst searches only remain visible last for 12-24 months.
What is a Credit Score?
A credit score is a number that you are given by the credit agency which really doesn’t mean anything. Every place has their own way of calculating this number, therefore, with no standard scoring system it becomes worthless.
Funnily, the lender doesn’t actually see your credit score. It is just a number that you can see. The lender only sees the detail about your accounts and history.
You can have a top credit score and not be granted the credit you require, due to being viewed as not profitable. You may not be a risk for a company – but if they don’t think they can make any money from you either, then it won’t be worth their time.
I’m sure though that by tracking it over time you can get a feeling of how well you are viewed. I.e if it keeps going down you can probably assume that there is a problem somewhere.
The importance of checking your credit report
If you think you will have a credit requirement at any point in the next 6 years, then it’s important to keep an eye on your report.
As previously mentioned, entries on you report are kept on there for 6 years after the closure of an account to ensure a history is available. Therefore, every entry can have a long lasting effect on your ability to obtain credit.
I personally check my credit report every month to make sure that everything is as expected. It is important to check that all of the listed accounts are actually reported correctly, if not you need to contact that lender and tell them they need to correct whatever is wrong.
The important thing to remember is that each lender will have different criteria for their lending activities, and so therefore the best thing is to make sure that you are happy your credit report is as accurate as can be.
How to check your credit report
It is best to check your report on all 3 bureaus – and luckily you are able to do this for free.
As already mentioned I check my report every month, and it doesn’t take long once you’ve given it a once over.
I have accounts with:
They all provide you with the information for free – and then offer tailored products off the back of it to cover their costs. Personally I am happy to have my report for free in return for them offering products to me.
Just sign up to each of them and then once a month, check that the data within is correct. If it isn’t correct, get it corrected ASAP and definitely before you apply for credit.
Hopefully now you know the importance of an accurate Credit Report if you need to get credit. There are ways that you can get around the requirement for credit at all, but for most people they will need it in one form or another at some point.