With the craziness that is life, we often forget to do things that are basic checks on financial aspects. Things like looking in on your 401k statement, college funds, allocation to savings, emergency fund are not super fun, but a good idea to at least stay present on how things are going and make small adjustments as necessary. You should also be checking your credit score to make sure nothing fishy is going on, like stolen identity or accounts that are listed as open that should be closed. Also, these statements show red flags that could impact your credit rating and your ability to get loans, or loans at better rates. If there are legitimate issues, just keep plugging away, making payments on time and eventually credit rating should improve.
From FINRA investors:
How Your Credit Score Affects You
Suppose you want to borrow $200,000 in the form of a fixed rate thirty-year mortgage. If your credit score is in the highest category, 760-850, a lender might charge you 3.623 percent interest for the loan.* This means a monthly payment of $912. If, however, your credit score is in a lower range, 620-639 for example, lenders might charge you 5.212 percent that would result in a $1,100 monthly payment. Although quite respectable, the lower credit score would cost you $188 a month more for your mortgage. Over the life of the loan, you would be paying $67,618 more than if you had the best credit score. Think about what you could do with that extra $188 per month.
* Scores and rates as of June 5, 2013, as reported on www.myfico.com.
Determining Your Credit Score
So, how do credit bureaus determine your credit score? Fair Isaac has developed a unique scoring system for each of the three credit bureaus, taking the following five components into account:
How much you owe
Length of credit history
Type of credit
New credit (inquiries)
Start here if you want. Annual Credit Report (links to annualcreditreport.com)
It’s a free site, do your own research if you are wary like I am to confirm that what I tell you is the truth and type into your browser directly. You shouldn’t take my word for it, I’m just some dude on the internet. It uses verification questions to confirm identity and checks with the three agencies, all at once, or you can rotate them every four months if you don’t want to check once per year and have initiative to stay on top of this.
It doesn’t give you your credit score, but shows you all the credit you currently have in your name (or combined credit if in both you and your spouse’s name). They do link to companies who will give you your credit score, but I’m wary of those since there is usually strings attached or some financial obligation and I’m cheap. When you’re done with one site, click on “Return to AnnualCreditReport.com” tab at the top to go to the next site. Each of the agency’s navigation is a little different but all are pretty straightforward.
If you find something that isn’t correct, there are instructions to get it rectified.