Understanding Credit Files
You balance your checkbook and check your portfolio, but how frequently do you check your credit files?Credit files are windows into your private life. Lenders look at your credit history to assess your creditworthiness. It’s to your advantage to know what your credit report says before you apply for credit so you can correct any inaccurate data. It can take up to six months for credit reporting agencies to make a change in your credit report, so give yourself at least that long before you start shopping for a mortgage, car or any other large purchase.
It’s also important for you to understand that with the rise in identity theft and credit card fraud, you may not know that someone has assumed your identity or opened new accounts until they default on loans, or collection agencies start calling you.
What should I look for in my credit report?
It is important to frequently review your credit file to verify the following:
Name
Address
Social Security Number
Date of Birth
All accounts listed are your own
Credit/charge accounts
Outstanding balances/limits on the accounts
Payment histories
Derogatory credit information has been deleted after seven years (non Chapter 13 bankruptcies after 10 years).
Inquiries
Why should I review my credit files from all three credit reporting agencies?
Each credit reporting agency records information it receives from your creditors. You can’t control which credit reporting agency (Equifax®, Experian® or TransUnionSM) your lender uses, so prepare yourself by checking all three agencies for accuracy.
What is a credit score?
A credit score is based on variables in your credit file that help determine your creditworthiness. The number is based on various factors, including the number of trade lines you have open, the number of late payments, delinquencies, etc. Lenders look at your credit file and other factors to determine your creditworthiness.
Why is my credit score so important?
Lenders carefully consider your credit score because it provides them with an objective measure of your creditworthiness. Your score can be impacted by many factors such as late payments, delinquencies, or high amounts of debt. Lenders may deny your loan or charge you a high interest rate if you have a low score. If you have a good credit history, you may have more options available to you resulting in lower interest rates and big savings.
Lower loan rates can mean thousands of dollars in your pocket over the years. If you purchase a home for $250,000 at 8.3% interest you will pay $679,306 over the course of a 30-year mortgage. At 6.5 % interest, however, you will pay only $568,861---a savings of $110,445.
To ready more about, 6 Steps to Better Credit, visit moneyreallymatters.com