Your credit history is a vital piece of information that tells about your financial well-being. What is shown in your credit report determines your creditworthiness to a lender. A good credit score will help you realise your current credit positioning. Hence, it is essential to keep frequent tabs on your credit report to keep it all intact.
Generally, a credit score is a 3 digital number, the higher the score the better. Your credit history consists of information on how you have regulated your credit accounts. It may include all your past credit amounts and the information of your payment history along with how much debt you have. Credit scores are calculated based on the information present in your credit report.
An essential advantage of having a high credit score is the credibility it creates in your lender. The potential lender or creditor will make use of this information and learn your history to decide if you should be lent money or not. These companies and organizations would like to know how good you are with your repayments and how likely you are to lend the agreed amount.
Keeping in mind all the above-given information, it becomes very important to keep a regular check on your credit scores as well as your credit reports. Your credit history must be clean so that the determining factor for your loan terms that includes interest rates goes easy on you. Hence, it is very important that the information in your credit report is as accurate as possible.
On the contrary, your credit reports do not consist of credit scores, yes they are calculated from the data that is present on your credit report and may be delivered along with it. You should also be aware of the fact that you may have more than one credit score. The reason behind this is that every credit bureau or company has a different way of calculating credit scores using different scoring models. This will cause your credit score to vary. Another reason why your score may differ is because of the underlying credit data which is different in different lenders. Not all lenders report to the nationwide credit bureaus. There are three such bureaus. Some report to one or two and some to none.
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Hence, it is a very good idea to check your report at least once annually. Know that you are entitled to have a free copy of your credit report at least once every 12 months from each credit bureau nationwide.
Why Should You Keep Frequent Tabs On Your Credit Report?
To Identify Incomplete & Inaccurate Information
Make sure all the data is complete and accurate and there is no unfamiliar information or accounts listed. If you note any kind of inaccuracy, immediately report it to the company that reports the information. You can even dispute the information with the credit bureau that equips your report. You may also want to have a look at the copies for the other two remaining bureaus to see if the same misinformation is present in that report.
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A Note On Hard Inquiries
Sometimes certain creditors and lenders use third parties to generate your credit reports in response to a credit application. In this case, the inquiry company name may be different. If you see and don’t recognize it immediately, contact your lender and see if a third party was involved to pull your credit reports.
Learn What Lenders May See
Preparation before applying for a huge credit is important. Something like a large purchase of a vehicle or a house. Checking your credit report smartly will give you an idea of what a lender will see when they check your report. It will also make you understand how hard inquiries work, especially when you are making a hefty purchase.
Ensure All The Accounts Are Reported Properly
While checking your credit report, ensure all your lenders and creditors are reporting your payment history very accurately. Sometimes, it happens when there is a missing account reported or a payment that is still mentioned as a debt. Ensure all the old information that can jeopardize and look negative such as bankruptcy and late payments are removed from your report.
Checking your credit reports and credit scores will help you in your next big step of either buying a home or a vehicle or just being up to date on your finances.
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