Even though credit scores can seem somewhat arbitrary, based on which credit agency is putting the information together, it becomes obvious pretty quick that they’re pretty important to all consumers. Yet it’s amazing at how few people actually get credit reports before they try to obtain loans or get credit cards, even though every American consumer is allowed to get a free credit score once a year, courtesy of the federal government. Let’s look at 5 reasons you should be availing yourself of this important piece of paper.
1. The higher the credit score, the better credit risk you are.
Most people think their credit is better than it probably is. A study done in 2015 stated that 56% of consumers have subprime credit scores, which is usually a score of 640 or below. having a low credit score doesn’t always mean you won’t get a loan, but your lender might consider you a credit risk and charge you a higher interest rate. It’s better that you know your status before you let someone else run your report because if it’s not up to par, just the act of allowing someone to run your credit report can actually lower your score even more.
Just so you know, not all credit reporting agencies will tell you what your credit score is unless you pay for it. The reports change all the time, so you might not get the score even from the free reports that come. However, usually at least one agency will give you your current score.
2. Sometimes they have errors.
In 2013, a FTC report found that 5% of consumers had at least one error on one of the 3 major credit reporting agencies (Experian, Transunion or Equifax). That’s only considering financial errors, because it seems there are a lot more people who say that addresses are some of the biggest errors seen, although that doesn’t count against you unless it’s within the last 5 years.
3. They may show an outstanding bill that’s been paid
The biggest errors that show up on credit reports are old bills you’ve paid off that don’t show as being paid. These can wreck your credit report because you haven’t received anymore bills and you probably thought it was all taken care of because of that, but it could either mean that the billing system messed up your address or your original creditor didn’t log your payment correctly.
4. Sometimes you can get a negative report reversed.
If you check your credit report and see a bill outstanding and it’s one you agree with, if you have the ability to pay it off you can contact the creditor holding your outstanding debt, make a deal to pay your claim off (at least the amount you actually owe) if they agree to send something to each agency once you’ve made that payment telling them that everything’s been satisfied. Even though it can stay on your report for up to 7 years from the time it made the list, it’s a positive notification that some creditors will take into account in your favor.
5. It’s always better to know.
Like a lot of things, people who fear their credit status are scared to check on it to see where they stand. It’s always better to know because if you know what’s going on and you don’t like it you can always fix it. You never know when you might need to count on it being in the best shape possible.