5 Reasons Your Credit Report Matters

5 Reasons Your Credit Report Matters More Than You Think

Think of your credit report as giant file cabinet and the score as a point in time.

Your credit history here!

The report summarizes a lifetime of using credit and your score is a snapshot of your current situation plus your accumulated use of credit experience.

1. The contents could be inaccurate (did you really live in Minnesota?)

2. Not all creditors report to all three credit bureaus

What if you have something that is affecting your score, but you don’t know what it is. Pull reports from all three bureaus once a year to see how they are the same and what shows up on only one report.

3. Is it really your credit report?

Two situations I’ve seen recently:

• a dad and son with the same first and last names ended up with [unintentionally] shared debt on credit reports
• a mom and daughter are co-signers – what if one person’s credit goes south?

4. Inaccuracies/errors and outright falsehoods need to be fixed

Your report has contact information for creditors and the place to make a consumer statement about certain aspects of the report.

5. Only looking at your scores, (available through Credit Karma, Discover, USAA to name a few) doesn’t help you improve them as fast. Without pulling the reports, you may not know the reasons your score is depressed, or the reasons your score is excellent. 65% of your score is derived from paying on time, every time and your credit utilization ratio (how much of your available credit are you using).

For example, one client I knew had an item from another state on her credit report, so she ignored it, as she had never visited that state. Turned out it was the billing headquarters for an old medical bill incurred in her home state. She needed to contact that creditor to resolve that item.  Another example, you and your spouse agreed to split debt payoffs in your divorce, but one of you has not lived up to that bargain. Make a consumer statement to that effect on your credit report.

Pulling your report is free if you use the legislatively created www.annualcreditreport.com.  For the last month I’ve been able to pull credit reports for service members and their families via http://www.saveandinvest.org. These reports include free scores from all three credit bureaus. FINRA  established this site which also includes calculators and how to check out a financial advisor.

Bonus: New version of FICO  [9] will be treating old medical debt differently http://bit.ly/YH9cMJ

Related Link: Getting and Changing Your Credit Report from Debt Slapped Grad: http://bit.ly/1JfbLtb

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Your True Balance Sheet

Most times I work with a client, we make a balance sheet to show their net worth. This shows what you own, what you owe and shows the difference between them. Some years in life (with mortgages, business, car or education loans) it may be negative; other years it will be positive (with a good trend line).

But these numbers do not not capture your life’s true balance sheet.

• Some elements of that here:
  Your dreams-what dreams of yours have come true? What dreams so you still have?’
• Your relationships-family and friends, your business community, receiving a smile from a random person as you walk down the street, seeing a beautiful image, created or from nature; other moments of artistic bliss.
• Your education and that of others-not your formal education, but the education from being a lifelong learner and seeing lessons shared with loved ones bear fruit in their lives. Being able to continue to grow.
• Your capacity for love, empathy and compassion for others.

Those cannot be measured by mere numbers, but in the delight, joy and compassion you receive [or give] in your life.

All the best to you and your families, with best wishes for a joyous, abundant year to come.

Seattle’s Victrola Coffee 2012. Photo Credit Dana Twight

Related Link: Share your values with your children; either in late night/early morning chats, stealthy emails or by writing an ethical will. Ethical wills have been used for 3,500 years. http://nyti.ms/1JS0tLv

Bright Shiny Objects, #1

Earlier this month I visited some friends at their house. Their mail was delivered while I was there and I noticed that several credit card solicitations sat in the large pile of envelopes.

Credit Cards (Photo credit: 401(K) 2012)

Besides not being the kind of mail that you look forward to receiving; these solicitations bring out the magpie in some people. Hence my reference to bright shiny objects. Not are only are these offers going straight to your shredder (NOT the recycle bin), they could represent a distraction from your financial planning by luring you into a glimpse of their promised riches, such as:

• 40,000 “free” airline miles
• free night at (insert hotel name here)
• you are pre-approved (stroking your self-esteem)
• credit limit of 5x your monthly earnings!

By visiting the website www.optoutprescreen.com or call toll-free 1-888-5-OPT-OUT. For more information on this topic, the Federal Trade Commission has an informative page here.

Disclaimer moment: I would also recommend completing this task on a private, closed computer, wi-fi network, or telephone landline. So not at the library or your neighborhood bar for security reasons.

Time to Complete: Ten Minutes (at most)

Benefits: Save trees, save time, and remember to use credit by choice, not by chance, and not due to a bright, shiny object dangling tantalizingly close to your face-or your wallet.

Opt-out (Photo credit: brr.kevin)