These Are Smart Tips For Credit Reports – How to Spot Mistakes

How often do you check your credit report for accuracy? If it’s not at least twice a year, you could be one of the 40 million Americans that have material errors on your credit report. There are some warning signs you might experience without checking your credit score that might tell you that you have errors.

Errors with your identity details
Occasionally one or all of the three major credit bureaus will have incorrect identifying information on your credit reports. It could be as something as simple as an incorrect address. That’s a relatively simple error that won’t be difficult to fix on your own. However, sometimes your name could be associated with someone else’s credit profile. Make sure when you check your credit report you go through it with a fine tooth comb to ensure everything on it is accurate and all accounts belong to you.

Incorrect or misleading account details
From time to time a creditor will provide incorrect or misleading information about your credit accounts to the credit bureaus. But more seriously, they could be reporting an incorrect credit limit which would affect your utilization rate or the wrong dates for your mortgage loan. Sometimes something could claim open when it’s closed or that you’ve missed payments when you haven’t.

Mysterious accounts
If there are items on your credit report that don’t belong to you, you might be a victim of identity theft. In 2015, an estimated 17.6 million American’s were victims of identity theft. Did you know that two-thirds of identity theft victims reported a direct financial loss? The Bureau of Justice recommends taking preventative action like checking your credit report regularly for accuracy. While some people were able to recover funds through their banks or credit card companies, other saw much more serious events like stolen social security numbers and new accounts opened under their names.

What do you do if you spot errors?
My best advice to you is to work with a credit repair agency. The hassle of getting your details updated or more serious, getting incorrect, misleading or unverifiable information off your credit report can be a total headache.

Catalogue the errors well and then bring them to the agencies attention. The more prepared you are the better a credit repair agency can help. Getting mistakes removed is a difficult process but thankfully credit repair agencies can do most of the heavy lifting for you.

You Should Know – How the Amount of Debt You Have Affects Your Credit Score

If I said it once, I’ve said it a thousand times; credit card debt isn’t the enemy, your spending habits are.

Your credit utilization rate is the second highest factor in your total credit score calculation. It accounts for 30 percent of your total score. It’s only second to your payment history which is a whopping 35 percent of your total score. Knowing this, the two most important factors to keep your credit healthy is avoid overuse on your credit cards and to pay your bills on time.

Do I overuse my credit cards?

Your total amount of credit card debt should always be under 30 percent utilization. What does this look like? If your credit limit on your credit card is $1,000, your credit balance should never go over $300. Going over 30 percent utilization can have serious implications on your credit score. How much? From a personal experience, my credit score dropped over 30 points. I was at 32% utilization because of an emergency and when I was able to pay it down to 28 percent, my score was restored and went up 32 points.

If you’re in debt up to your eyeballs, it could affect more than just peace of mind and your credit score. It could actually cost you more money. Creditors may not lend to you if you’re consistently nearing your limit on your credit cards. You’re considered high-risk because you’re spending more than you make. If a creditor does lend money to you, you might be saddled with a high interest rate on you credit account.

How can I fix it?

Overuse of credit accounts is part of a larger problem than 30-ish points on your credit score. It’s a symptom of poor spending habits, which can be costly and frustrating as time goes on. Building debt has never served anyone. It’s imperative to start building healthy spending habits if you’ve noticed that you’re consistently going over 30 percent utilization.

The first thing you should do is pay down your debt to under 30 percent utilization. Make a plan, put together a budget, and stick to it. Make the distinction between wants versus needs.

Once your debt is under 30 percent utilization, make sure not to go over 30 percent. While it might be uncomfortable to change your spending habits, the long-term effects will give you more peace of mind, a higher credit score, and the ability to secure a healthier financial future.

 

You Should Know – How Closing a Credit Card Account Affects Your Credit Score

Do you remember the excitement surrounding your first credit card? You probably applied for a credit card when you went to college or maybe your parents offered some advice. Either way, you’ve had that card since your teens or early 20s and it’s probably not the greatest card in your wallet. It might have a high interest rate, no rewards or a lofty annual fee.

Once you starting building good credit you were likely offered better credit cards. Your interest rates are lower, you probably don’t have an annual fee or a it’s a low fee, and you probably have access to airline miles or cash back rewards. So, why keep the card that is no longer serving you?

How will closing the accounts affect my credit?

The important thing to remember is that when you make the decision to close a credit card account you’re reducing your credit utilization rate. Remember that credit utilization accounts for 30 percent of your total score calculation. You’ll need reduce your spending habits when you close a credit card account or you’re likely to go over the recommended 30 percent utilization rate causing your credit score to take a nose dive.

The average age of your credit accounts is another important factor for your credit score. This is two-fold. If you’re newer to credit, it’s best to keep old cards open because they remain on your credit for 10 years. That card, though rarely used, is actually helping your credit – especially if you have good payment history. Closing it could hurt your credit far worse than someone who has been building their credit for more than a decade.

So, what can I do?

If you have a high interest rate or a large annual fee, try negotiating with your credit card provider. Sometimes if you tell them you are considering cancelling the card due to high fees, etc, they may work with you. It costs them far more money to acquire a new customer than it would cost them to waive your annual fee or lower your interest rate.

Sometimes you have to close a card. If it’s costing you money because the credit card company won’t negotiate a waived or lower annual fee, it doesn’t make sense to keep it. Your credit might take a hit, but it will recover. You can’t however, recover lost funds due to annual fees for a card you don’t use.

Closing a credit account should not be taken lightly. Make sure to consider the factors listed above before you close your accounts.