BOSTON (CBS) - You should know your credit score and have reviewed your credit report at least annually. Why?
One listener wrote to tell me about his car being totaled and he needed to buy a new one immediately. He went to get a car loan but was denied. When they checked his credit report it indicated that he had many credit cards and outstanding loans. Most of which were not his. Someone was using his identity to obtain credit.
According to Bankrate.com 35% of consumers have never checked their credit report even though it is free.
You may think your credit report is perfect but recent studies have shown that perhaps as many as 50% of all credit reports have errors in them, errors that could prevent you from qualifying for a loan.
Today, your credit report and credit score are used as measuring tools for more than simply applying for a loan. A potential employer may ask your permission to review your credit report. Insurance companies, phone companies, utility companies as well as landlords want to check your credit scores.
Credit cards that have never been formally cancelled still appear on your credit report as an open line of credit, even if you have not used them in years.
These can potentially cause problems because, if you are applying for a loan such as a school loan or a home mortgage, they will be entered into the credit formula as debt, even though there is nothing owed on them. You still have the ability to charge them to their limit.
Your first line of defense against an identity thief is to annually check your credit report for any fraudulent activities.
Laws now require credit reporting agencies to give you a free copy of your credit report annually. The easiest way to get it is to do it online. www.annualcreditreport.com.
To get a copy of your credit score log onto My Fico. You will have to pay for your score at MyFico.com. There are many places offering free credit scores including some credit card companies.
One more thing: Another reason you want to check your credit report and probably in today's environment the most important reason is to check for identity theft. If someone has stolen your identity and is using your Social Security number the bogus credit cards will begin to show up on your credit report.
And while you are checking your credit history inquire about your credit score. More and more creditors are using credit scores as a measurement factor in deciding if you should get a loan and what interest rate to charge you. Contact MyFico, www.myfico.com, for your scores or go directly to the reporting agencies.
There are three major reporting agencies, and they do not share information with each other, so you need to check your history from all three agencies. If you find errors, you can write to the agencies explaining the error, and they have 30 days to correct the error. Send any supporting documentation as well. You'll want to check your report again after you have sent the corrections to be sure the changes were made.
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