Check your Credit Report Periodically

When was the last time you checked your credit report? If it hasn't been fairly recently, how do you know if what it's portraying about you is correct? When you apply for any type of credit – whether it's car financing, a home loan, or credit card account – you are implicitly giving the company with whom you're applying permission to check your credit report. Potential employers, insurance issuers, and landlords will also check your credit file if you provide them with your Social Security number. The problem is, the information on your credit report is probably not totally accurate and may affect your profile negatively. A very bad report will make it nearly impossible to get a loan or even a job, whereas a report that's not quite as horrific will nevertheless cause the lender to charge you a higher interest rate. The people who make loans and leases look at your credit file as a prediction of whether or not you're a good financial risk; in other words, they use your past payment behavior to predict your future behavior and will charge you less interest if they believe that you'll pay the loan or lease fully and on time.

All types of insurance issuers (automobile, home, health, and life) review applicants' credit reports before making policy rate decisions because they believe that there's a correlation between financial responsibility – or irresponsibility – and the amount of claims made. In fact, over ninety percent of all auto insurance companies and property insurers are now using credit scores to determine insurance rates.

Many people think that they can overcome a few delinquent payments by showing a high income, but this simply isn't the case. Income is only one factor that someone considers when judging you for creditworthiness. You're also examined to see if you paid that $40 pharmacy bill on time several years ago. Of course, the most current history on your report (within the last year or two) contains the most important and heavily weighted data. And significant items such as timely payments on cars, homes, and credit cards are extremely important. But small things have an impact too; so don't neglect them.

For example, you may have turned in your cable box but not received proper credit from the cable company. This may count against you, and neither the cable company nor the credit bureau is going to fix the problem automatically. It's your responsibility to do it. How? You contact the cable company and ask for a written document stating that you and not the company canceled your service, and that they did receive their equipment back from you. Then forward a copy of that document to each of the three credit reporting agencies. Many small discrepancies are just that easy to correct, and can make a dramatic difference in your credit score.

Take responsibility for your credit and your credit report. It's free to check once a year (from each agency) by ordering it at AnnualCreditReport.com. But with the proliferation of identity theft, many experts suggest that you review your file at least every six months. The reporting agencies will charge you a small fee for these additional copies. However, staying on top of your credit shouldn't be viewed as something that costs you money; rather, it's a measure that can save you significant sums of money in needless interest charges over your lifetime.