Some people ignore their credit reports, and the only time they think about credit is when they're ready to apply for some sort of financing. However, it's important to monitor your credit on a more regular basis. What you don't know can hurt you.
Here are seven credit report mistakes that can cost you big-time
If you have a common name, such as John Williams or Lisa Smith, someone else's information could end up on your credit report. And if it's negative information, it can drive down your credit score and make it harder to get approved for loans. Creditors and credit bureaus make mistakes. Order your credit report at least once a year to check for inaccuracies.
Identity theft is a real crime and these thieves are clever. They know how to find your personal information and open accounts in your name. They can open a credit card in your name, max out this account and leave the balance for you. This negative information can find its way on your credit report. By checking your credit report regularly, you can look for unfamiliar accounts and catch identity theft early.
Negative information, such as late payments, collection account and judgments stay on credit reports for up to seven years. But just because a negative remark hits the seven-year mark doesn't mean the credit bureaus will automatically remove the information. Sometimes, information remains longer. You have to stay on top of your credit report to ensure outdated information is removed in a timely manner.
You can make timely payments every month, but your creditor might accidentally report your account as delinquent. A payment that's 30, 60 or 90 days past due can lower your credit score by as much as 50 to 100 points. And the higher your credit score before a reported delinquency, the more points you'll lose.
If you apply for a mortgage or an auto loan, the lender will calculate your debt to income ratio to determine whether you can afford the loan payment. Balance information for credit cards and other loans should be accurate on your credit report. If not, a bank may conclude you can't afford a payment. For example, if you only owe $500 on a credit card, but your credit card company accidentally reports that you owe $5,000, this error can affect whether you're able to qualify for a loan.
This happens more often than you might realize. If you have legitimate negative items on your credit report, check your credit report to make sure creditors don't duplicate this information. If it's reported twice, it'll appear as if your credit is worse than it actually is, which can further drive down your credit score.
If you close a credit card account, make sure your creditor updates the information accurately. Some companies will mistakenly report that an account was closed by the credit card company, which doesn't look good because it implies you had issues with the account. But if you voluntarily close your own account, it won't affect your credit score as much.
Your credit report is the single most important document a lender reviews to determine if you qualify for financing. So, it's important to ensure the accuracy of information and check your reports at least once a year. Can you think of other costly credit report mistakes?
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