The Importance of Understanding Your Credit Report and Credit Score


  By Lauralynn Schueckler

There are many good reasons why you should understand what is on your credit report and what your current credit score is. For example, if you are trying to rent an apartment there are credit checks that are performed on possible tenants by the landlord.

If you have bad credit or a lot of late payments, you may not be able to rent an apartment or house. Your credit report and credit score are also very important factors when you are trying to obtain a mortgage to purchase a property. Lenders will look very closely at both of those aspects to determine your pre-approval purchase price and interest rates.

Another important reason to fully understanding your credit report and credit score is because of today’s cell phone contracts. Cell phone companies like Verizon or AT&T usually check your credit before you can sign up for their service. They, like many other companies that perform a service, want to ensure that you will be able to pay your bills on-time every month. 

Credit card agreement changes, such as Annual Percentage Rates, are another reason why you need to know your credit score and comprehend what’s on your credit report. Those who issue credit to you, for example credit card companies or lenders, will definitely run a few credit checks. If your credit score is low and you don’t have the best credit history, then you are looked upon as being high risk and they may alter the terms of your agreement or give you higher interest rates. Car insurance is another area where credit scores are checked. If they see that your credit score is low, they may also look at you as being high risk and can raise your premiums. 

It’s important to note that by understanding your credit report, you can catch any reporting mistakes that have been made–mistakes that can be quite costly financially and can ruin your credit reputation. Mistakes in this area have been increasing as of lately and they are usually rather easy to fix. Free copies of your credit reports can be found on several online websites like www.annualcreditreport.com.

In addition, you can also learn from your credit report how much you can afford; especially when shopping for a home. When you are looking to purchase a property and will be obtaining a loan from a mortgage lender, they will look at your credit report and credit score to determine your pre-approval price or your “purchasing power”.

Also, your credit score may be much higher than you anticipated and that can be a wonderful feeling. But if it’s not so good, you might be able to take some steps towards improving it. Some financial experts suggest checking your credit report regularly, every 3-6 months, and if you find things on the report that are unclear or wrong; you should work quickly towards clearing up the problem.

Keep in mind, if you find that you have a low credit score, you will have to pay higher credit card interest rates, loan interest rates, and it can also lessen the likelihood of obtaining a school loan, renting an apartment, acquiring a new job position, or even having certain medical procedures performed.

If you just started having problems with your credit or if you’ve had problems with your credit in the past, a credit counseling agency can be of great help. Advantage CCS offers a Credit Report Review service that will help you grasp a better understanding of your credit report and credit score. The certified credit counselors may also be able to provide some action steps and suggestions on ways to improve your credit score. However, be careful of non-accredited agencies that say they can immediately take care of any problems you have with credit and instantly raise your credit score. 

There is no fast fix when it comes to your credit and if it sounds too good to be true, it probably is.

Lauralynn Schueckler is the Online Marketing Specialist at Advantage Credit Counseling Service. She is the author for Advantage CCS’s Blog called Dollars & Sense. Advantage Credit Counseling Service is a member of the National Foundation for Credit Counseling. Contact Advantage Credit Counseling at 866.699.2227, or visit them online at www.advantageccs.org.

Views expressed are the personal views of the author, and do not represent the views of the National Foundation for Credit Counseling, its employees, its members, or its clients.

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