Most people know how important and necessary good credit may be to obtain the things that you want in life. Yet, sadly, many people fail to stay on top of their credit. They may not monitor their credit score or take advantage of yearly free credit reports. Unfortunately, scary things may happen when you ignore your credit report.
There May Be Collections You're Unaware Of
Nonpayment of a debt may result in the lender submitting the account to collections. Collections activities may drop your credit score significantly, and they stay on your report for up to seven years. In some cases, you may not know you have been sent to collections, especially if you move frequently. Or even worse, you may have a collection on your credit report where you have proof that you paid the debt.
Catching collections on your record early makes it easier to dispute them. Also, if you were unaware you were sent to collections, you may be able to call the collection company and ask if you may pay in full in exchange for removal from your credit report. Make sure to ask for this promise of removal in writing.
Someone May Be Using Your Identity
Checking your credit report regularly also alerts you to potential fraud. Identity thieves are rampant, and many use your Social Security number to open up new credit. Monitoring your credit report or using a free credit monitoring program alerts you to new accounts. Otherwise, you may not realize your identity has been stolen until the account is in default. At this point, it may be a lot harder to undo the damage.
It Gives You a Picture of Your Credit
Looking over your credit report gives you a broad overview of what is affecting your credit and your overall financial situation. View the balances you owe on loans and cards, what your monthly payments are, and how much your debt to available credit ratio is.1 This may help you see the importance of better budgeting and cutting back to work towards improving your credit. Never close an old account – it helps to establish your credit history.
An important part of staying in control of your finances is knowing what is in your credit report. Thanks to a yearly free report and credit monitoring programs, obtaining your credit report is easy and may help you maintain better credit in the long run by encouraging you to monitor your credit use.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
All information is believed to be from reliable sources; however LPL Financial makes no representation as to its completeness or accuracy.
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Footnotes: 1 6 Scary Facts About Credit and How to Protect Your Credit History, Creditfresh, https://www.creditfresh.com/blog/scary-credit-score-facts-and-how-to-protect-your-score/