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Saturday, October 26, 2013

5 important tips for monitoring your credit

Correction of credit reporting errors helps ensure proper loan underwriting
Loan underwriting uses credit data
If you're like the average American, you probably haven't checked your credit recently. Being credit ignorant can be a really dangerous situation, particularly when it comes to applying for credit and protecting yourself against identity theft. If you follow these simple tips, you can be much more aware of the overall state of your finances and credit history.

 

1. Get the complete picture


If you have not checked your credit report before or it's been a few years, now is the time. Experts recommend that you check your credit at least once a year. You can do it for free by going to AnnualCreditReport.com and requesting your report. There are three major credit reporting bureaus:
  • Experian
  • Equifax
  • TransUnion
These bureaus collect information from your creditors about your payment obligations and history. Every year, you should get a complete credit report from each agency.

2. Fix inaccuracies quickly


When you look at your three credit reports, you may notice some inconsistencies between them. You may also spot a few mistakes in your current address, job record or payment history. When you find an error, it is important to fix it as quickly as possible. Inaccuracies that show you were late on a payment when you weren't or that show open accounts as closed can affect your chances of obtaining credit when you need it. Your reports should always be accurate. If they aren't, you should follow the process to correct it, or hire a professional credit repair agency to help you.

3. Know your score


There are two different versions of credit scores. The first is your Fair Isaac and Company (FICO) score, which ranges from 300-850. Higher scores are preferred. This credit score takes the information in your credit report and assigns a number based on the length of your credit history, your payment record and any negative factors such as late payments. Since your credit reports are all a little different, you can have a different score from each reporting bureau.


In 2006, the bureaus themselves decided to get into the credit-scoring game. Experian, Equifax and TransUnion released the Vantage Score to compete with FICO. Scores range between 501-990. The agencies argue that the Vantagescore is more accurate than FICO because it represents potential risk more than simply past history.

4. Consider a credit-monitoring service


Checking your credit once a year may not be enough. If you are in the process of rebuilding a problematic credit history, you have had a history of identity theft, or you don't have much of a credit history, you should be monitoring your report more regularly. Many companies offer credit monitoring services at a reasonable rate. Depending on what you pay, you will usually get notices if someone has requested your credit report, and be able to see your credit reports and scores as often as every month.

5. Check alerts


A regular feature of any credit monitoring service is alerts. This option will let you know when someone has requested your credit report. Since this is one of the first lines of defense against identity theft, you should follow up on these alerts as soon as possible. If you don't recognize the company checking your credit, or if you know you haven't applied for any loans recently, contact your monitoring service and the reporting bureau for advice on how to proceed.

Sometimes we don't stay up-to-date on our credit reports, but this is easy to fix. By checking all versions of your report at least once a year, making sure they're accurate and considering a monitoring service, you'll be in a much better position to apply for loans and avoid identity theft.


About the author: Nicole writes about credit, credit monitoring, and credit repair. She thinks that BestCreditRepairCompanys.com offers the most unbiased reviews on credit repair companies.

* Image license: Lusi, RGBStock royalty free