6 Reasons to Clean-up your Credit Report
Like your home, it’s a good idea to seasonally “deep clean” your credit history… clean everything that’s dirty, fix what’s broken, and polish what you have. By signing up for a reputable credit monitoring service and utilizing your free yearly credit report (www.annualcreditreport.com), you can protect yourself from identity theft, adjust your spending plan to pay down debt, and make financial goals for the future.
Four times a year (and anytime in-between), sit down, grab a cup of coffee, and review your financial situation. When “cleaning” don’t worry about the score, focus on your history. Credit scores are a direct reflection of your history… if you tidy up your report, a good score will come. Instead of waiting for a “clean slate,” clean it yourself!
A healthy credit history usually leads to stable finances.
By handling and examining your finances regularly, you are better able to reach your short and long-term money goals. You can’t know where you’re going without knowing where you’ve been!
To keep yourself motivated, figure out where you want your money to take you. Do you want a family vacation? To retire early? A new car? Establish an emergency savings account?
Know what you owe.
It’s easy to forget the little things or let balances get out of control. Add up your current debt and set some goals! Think about where you want to be or what progress you want to make by the next time you “clean”. Once you have established your goals, make a game plan consisting of reasonable small steps to make progress.
This is also a good time to look at the types of debt you owe. Do you have multiple types of accounts or is it all unsecured debt? Having too much of one type, such as credit cards, can harm your score more than build it. Always try to have a diverse mix of accounts such as credit lines, secured (loans with collateral), and unsecured loans.
TIP: If you are looking to pay down your debt fast without sacrificing your budget, check out www.powerpay.org for safe assistance with rapid debt repayment.
Make yourself less risky to lenders.
Credit scores and histories can impact your ability to get loans regardless of how long you have been with your financial institution. If you are looking at your report and you see old collection accounts, get rid of them! You may not be financially able to pay them all off at once, but you can call the collection agency to set up REASONABLE payment plans.
If you break an agreement with a collection agency, they may be less willing to work with you regarding the terms of your debt in the future. Once you have paid your collection accounts, watch to see that they are listed as “paid” on your credit report. Some collectors may even remove the collection completely; it doesn’t hurt to ask!
TIP: If you are feeling overwhelmed with debt and collectors, contact your financial institution and see if there are free financial counseling services available.
Look great to future employers and landlords.
Many businesses and rental companies require a credit check before any contracts are offered or leases can be signed. Most are not looking for a specific credit score, instead they are looking at your credit history. You may be a less than desirable applicant if you have multiple collections and/or late payments on your credit cards or loans.
Lock in the best possible rates for services.
Most people think loans are the only accounts impacted by your credit history. Necessary services such as insurance and cellphone plans may cost you more due to a poor credit score. Once you have fixed some of your credit woes, check back with your agent or provider to see if another credit pull is necessary to secure lower payments.
Stop fraud before it starts (or gets out of hand).
When looking at your full credit report, look for discrepancies in your personal information. This could mean that someone has been trying to apply for credit or services under your name. Something as simple as a wrong birthdate or address may indicate attempted identity theft. Work your way through your report looking for accounts, balances, and authorized signers on accounts that you did not initiate or approve.
If you find suspicious activity, contact the lending institution and all three major credit bureaus: Transunion, Equifax, and Experian. By doing so, you can put an alert on your account to inform all future lenders of past fraud.