Why Your Credit Report Controls Your Financial Life

With the Equifax date breach being announced just over a month ago, credit reports and credit scores were actually an important topic of conversation for a change. However, a month in this day and age can seem like years ago.

Now that it is almost considered old news, we’re back to our normal everyday lives and, believe it or not, that’s not thinking about our credit reports or even our credit scores. That has become old news and we’ve now moved on to the next headline.

However, we shouldn’t be moving on. There’s still a lot to talk about because most people have no idea how important these rating agencies are to their personal financial lives. Whether you believe it or not, but these agencies can basically make or break what decisions you can make in your personal financial life.

Think your credit report isn’t a big deal? Well, you would be wrong, so so very wrong. If you're like most people you probably never check it all. But you would be surprised at the important role this one little report plays in your entire financial life.

The big three credit reporting agencies – Equifax, Transunion, and Experian – each create their own types of reports and credit scores, but they’re all very similar. These three are the ones every single bank out there uses to determine whether you’re getting that loan or not. Plus, there are many employers today that will run credit reports before ever hiring someone. Guess where they get these reports from…that’s right, from one or all three of them.

Now you can see why I said your credit report does control your financial life and so many other aspects of your personal life. If it controls what house you buy, what car you own and whether you’re getting that job or not, then I would venture to say there isn’t another thing in your life that garners that much power.

With that being the case then, why don’t more people take it seriously? Rarely do I ever have a client or friend tell me that they review their report even when you can do it for absolutely free at annualcreditreport.com.

Are we really that lazy or do we just not think about it because we have so many other things going on in our lives and we just forget the importance? I would venture to say it’s the latter, but I hope this post makes you think differently because it will literally take you about 15 minutes every four months to review your credit report and or credit score to make sure all is good.

Your credit report will show you every credit card and loan you’ve ever applied for in your life along with when your credit has been run at any time. If someone is trying to steal your identity, then your credit report is going to show you that before you find out some other way when it’s way too late.

If you have credit cards open that don’t look familiar, it will show you. If there have been credit checks run on you, then it will show you. If you have unpaid balance out there, it will show you.

Your credit report can make your life so much easier just in case something fishing is happening. You’ll be able to take care of it before you’re in debt up to the gills and find out from your bank – or even worse, your possible new employer – that your credit score/report isn’t up to snuff for that new loan or new job. How awful would it be to hear those words and you had no idea.

So what can you do about it? I recommend setting a reminder in your smartphone or email every four months to check it. Annualcreditreport.com allows you to check your report for FREE once every 12 months from each of the three credit rating agencies.

So, I would set an annual recurring reminder today to check it from Equifax. Then, set another annual recurring reminder to check it from Transunion in four months and then a final annual recurring reminder to check it from Experian in eight months. This will ensure you every four months that you’re getting an updated credit report. Trust me, this is more important than ever with the amount of data breaches that happen so regularly.

As for your credit score – FICO score – a lot of credit cards offer credit scores for free. Discover offers it completely free to anyone through Transunion. American Express gives customers free access to their FICO score based on the FICO 8 formula. Learn more about getting your credit score for free here.

I would also recommend you check out Credit Karma as well. I absolutely love this site and it will provide you with a FICO score as well using VantageScore 3.0 – which basically just takes information from your credit report and turns into a score. Credit Karma also offers some other cool recommendations on the site and lays out your credit report in a much easier to read format.

Regardless of where you get your credit report or your FICO score, just do it. Set your reminders and check regularly. While I can’t guarantee something will happen to you, it seems like more and more people every single day are being affected. Take the necessary steps and take control of your credit – I can assure you it it won't take that much time.

This is a post from Clint Haynes, a Certified Financial Planner® in Lee’s Summit, MO. He is also founder and owner of NextGen Wealth. You can learn more about Clint at the website NextGen Wealth.