From the time a person becomes of legal age and begins to use credit for things like car payments and credit cards, three main credit report agencies keep tabs on all credit activity throughout that person's life. This information is stored in a computer and compiled routinely. But you will never see your credit report unless you request a copy.
Because of all the work put into saving, compiling, and evaluating your credit information, the three credit reporting companies (TransUnion, Experian, and Equifax) require that you pay a fee to receive a copy of your report. But the fee will be waived if you are denied credit and then request a copy of the report to find out why.
Even if you do not use a credit card and seldom make payments for things you purchase because you prefer to pay cash, it is a good idea to check your credit report once a year, or at most, every two years. Here are the reasons why and what you should look for:
1. There may be a problem with your credit history. Wrong, missing, or incomplete information on your credit report may lead to your being denied credit when you want to take out a loan to buy a car or a home. At that point there won't be much time to start figuring out potential problems with your credit history. It's better to make an annual check and head off potential problems sooner rather than later.
2. You may find someone else's account has been added to your credit report. This may be due to fraud, if someone has stolen your account and used it to charge things in your name. Or the mix-up may be due to a computer glitch or a file switch that inadvertently confused two or more people's accounts. Check your report carefully to be sure that each account posted on it reflects your accurate information.
3. The report may list an account as "open" or "unpaid" even though you paid it off years ago. You will need to contact the vendor and ask for an update of your account to ensure that your credit report receives a change of status and removes incorrect information that can damage your credit standing.
4. Your credit history may have an unfavorable rating due to circumstances beyond your control. For example, a company may have gone out of business or transferred outstanding accounts to another organization without informing customers who still owed money. Consequently you were willing, but unable, to pay this debt and were never notified with the correct forwarding information. If this happens, contact the company that holds the uncollected accounts and offer to make payments to get the account straightened out.
5. The credit report may contain a low credit score that you need to address. If there are unpaid debts or missed payments on your record, resulting in a low score, find out what you can to improve your financial standing. Don't wait until you need credit to improve it then; do it now, while there's still time to negotiate payment plans and buyout options.
Your credit history will follow you through life. Take good care of it and it will reflect well on you when the time comes for credit approval.
