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Why You Need to Check Your Credit Score Annually

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Most North Americans no little or nothing about their current credit rating. The only time they know when something is wrong is when their credit application gets denied. The fact is, you need to know everything about your credit rating and what is in your file or it could spell trouble down the road if you are ever looking to borrow money, applying for a mortgage or leasing a car. So getting your credit report is extremely important and it is something you should consider doing annually.

What is your credit file and how did it get there?

Every time you apply for credit either through a credit card company or if you apply for a mortgage, buy new furniture on the don’t pay for 5 years plan, the banks, financing companies, credit card companies etc. send specific information about the transaction to the credit reporting agencies. These credit reporting agencies collect and store this data that will and can be accessed by other companies at a future date. This credit file contains all the information about your credit activities that companies have send in.

So why do you need to review your credit report annually? Because companies make mistakes when they send information in to these credit collection companies and this misinformation could be very damaging to your personal credit rating.

Another important reason is because of identity theft. This is a craze that is spiraling out of control. People are having their credit ratings virtually destroyed by someone who has stolen their identity and has gone on wild spending sprees. In some cases, it can take years to clean up your credit rating if you have been the victim of identity theft. This alone is the major reason to check your credit score regularly.

Who has access to your credit file?

No one can access your personal credit report or file without your consent. This consent is granted when you fill out a form from a lending institution that says they will be accessing your file or they have told you they will be accessing your file. Each time someone pulls your credit file, a note is made on the file to track this.

People can only have access to your credit file for the following reasons:

o Applying for some form of credit – card, loan etc.

o Debt collection

o Housing rental

o Applying for employment

o Applying for insurance

With the new privacy laws in place, it is very difficult to get personal information without the individual knowing and consenting.

How to obtain a free credit report:

You can obtain your free credit report 2 ways. You can either submit a request form or you can call credit collection agencies directly. These companies will then issue via mail your free credit report.

Is a free online credit report available?

Yes. However, it may not be a complete report. There are a number of companies that will try and offer a free online credit report. There may be a small fee but you will be able to access your information quickly versus waiting for it in the mail. Remember, be sure you are dealing with a reputable company that is recognized in the industry when giving out personal information over the phone for your credit report.

Credit Report Score:

Every item of credit history is given a score or rating by the credit grantor. The most commonly used ratings in North America are the “R” ratings. The “R” stands for revolving credit and you can score from an R1 (you always pay on time) to an R9 (bad credit). If you have a number of R9 ratings on your credit report score, this would indicate to a lender that you are of high risk. They may still decide to lend to you, but expect a higher interest rate than if you had a very good credit score.

The most important thing you can do is clean up your bad credit scores quickly. Lenders want to lend their money out or extend your credit. If they can see a positive trend in your score, they will be more eager to lend to you than if they don’t.

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