In many of my recent columns I've been writing a lot about credit reports and credit scores. Most of us don't need to be reminded of the importance of reviewing credit reports and fixing any errors, we know that keeping a clean and accurate credit report is important.
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If you're one of the many Americans who already own your home and a car (or don't plan on buying either in the near future), you probably think that your credit score itself isn't that important. If you aren't getting a loan in the near future, why should you worry about your score? Unfortunately, your credit score is more important than you think and is being used by many institutions to help make decisions about you.
You "borrow" from a lot of institutions without explicitly borrowing money and those institutions often check your credit to decide if they want to do business with you. If you are currently renting where you live, your landlord almost certainly checked your credit history and used that to decide whether or not to rent to you.
If you have a good credit score, they probably asked for a smaller security deposit or reduced other fees. If you had a weaker score, or no score, they may have asked for more to offset the additional risk. If you're wondering what you borrowed from them, you borrowed the right to live in that home. The worst case for a landlord is to not be able to collect rent and be forced to go through the eviction process, which in some states can take many months. That's a risk they try to avoid and a credit report helps them do that.
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If you own a cell phone, some cell phone providers are using your credit score to determine who to give a cell phone too. Many cell phone companies offer free hundred dollar handsets for a two year contract, but what's to say you'll follow through? Your credit score will give them a good indication of who they can hold to a 2-year contract and who might stiff them halfway through.
If you're looking for a job, some employers are allowed to use your credit history to determine how safe of a candidate you are. While it's been shown that there's no relationship between a bad score and being untrustworthy, some employers, unless barred by law, are still using it to help them decide whether or not to hire a candidate. The last thing you want to do is have a missed payment cost you a job.
Those are just a few of the unexpected ways that a bad credit score can hurt you but fortunately you can do something about it. Be diligent about reviewing your credit reports and fixing any errors and inaccuracies. If you've been checking regularly and have seen no errors, keep up with it. Sometimes errors appear when you least expect them.
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I've been reviewing my credit report for years and only just recently did I see a major problem (an unrelated account, which was behind on payments, appeared in my Experian report earlier this year), so stay on top of it. You can check your credit report for free at AnnualCreditReport.com.
If you're curious, there are ways for you to check your credit score for free if you're willing to sign up for some trials. I would avoid dealing with companies that aren't Fair Isaac Corporation (makers of the FICO score) or one of the three credit bureaus (Experian, Equifax, TransUnion). Fair Isaac's consumer facing company is MyFICO and you can often find plenty of MyFICO promotion codes.
Has your credit score caused you headaches in ways you never thought possible? Please let us know!