If you struggle to pay your bills or have a large amount of debt, the last thing you probably feel like doing is examining a detailed list of everything you owe to your various creditors. But virtually everyone should request a copy of their credit report, no matter what shape their finances are in. In most cases, it’s what you don’t know about your credit that puts you at risk.
Here are just a few reasons:
It’s easy — and free. You’re entitled to a free copy of your credit report from each of the three credit reporting bureaus, Experian, Equifax and TransUnion. There are several websites by which you can access your report, but the only one approved by the federal government is www.AnnualCreditReport.com. You can request reports from all three bureaus at once, or space them out over a year to track your efforts if you’re working to improve your credit.
Bear in mind, however, that your free credit reports do not include a credit score, which is a calculation affected by how quickly you pay your bills and other factors. You may be able to access this through a credit bureau, and some credit card companies also include your score on monthly bills. But because each bureau calculates this score in a slightly different way, it’s best to focus on the details of the report itself.
Your report may have errors, and only you can resolve them. Mistakes on your credit report can prevent you from securing loans, getting approved for a credit card or even landing a job, if the prospective employer runs a credit check on you. A Federal Trade Commission study found that one out of every five consumers has an error on their credit report. Those consumers who reported the inaccuracies to at least one credit bureau later consequently saw credit score increases once the problems were resolved.
Because no one else is likely to find these errors, it’s up to you to examine your own report for things like balances on cards you’ve already paid or wrong names and addresses (mistaken identity is a common credit report error). If you find a mistake, contact the credit agency and report it. The agency has 30 days to verify the suspicious information or remove it from your report.
Knowledge is power. Once you have a copy (or three) of your credit report, you’re in a better position to strategize. Do you routinely pay your bills late? Perhaps you applied for too many loans or credit cards in a short period of time, or spent too close to the limit on one of your cards instead of distributing your debt over two or more cards. Knowing exactly what makes you a credit risk can help you determine what habits you need to change first to improve your standing.
If you’ve examined your report and still feel stuck with few options for solving your credit problems, it might be time to seek additional help, perhaps from an experienced bankruptcy attorney who can offer advanced solutions to get you back on track.