October 15, 2020
Checking your credit report is free. And it is incredibly important to do. But a new survey from CompareCards.com says that just one in three adults checked their credit report last year.
I can’t tell you how concerned this makes me. I know many of you are able to get a free FICO credit score every month from your bank. That’s great. But everyone should also check their credit reports as well.
It’s been a while since we’ve reviewed credit scores and credit reports. Let’s take a quick spin: FICO is the most widely used credit scoring system. You actually have 3 basic FICO scores: one from each of the main credit bureaus: Equifax, Experian and TransUnion. Those scores determine if you can borrow money, and what interest rate you will be offered. It also comes into play when you apply for a new credit card.
FICO scores range from 300-850. A score of at least 740 is very good. If your score is below 700 you may find it hard—especially during this recession—to qualify for deals or get a good interest rate.
Think of your credit report as the building material for your FICO score. You need to make sure that all your material is in good shape by making sure there are no mistakes, and looking out for signs of identity theft.
An annual check of your credit report is vitally important to catch identity thieves. You want to make sure there are no new accounts (loans, credit cards etc.) showing up on your credit report that you didn’t authorize. That’s a sign that a thief has posed as you and taken out a loan or credit card in your name.
You can check all three credit reports for free by going to www.annualcreditreport.com. You never have to pay to get your credit report, nor do you need to share credit card info. Instead of getting all three credit reports at once, conside
If you ever spot a problem, follow the directions that will be included in your report. Once you file a dispute or report a problem to one credit bureau, they will share with the other bureaus.
Answer Yes or No to the follow statements.
I pay all my credit card bills in full each month.
I have an eight-month emergency savings fund separate from my checking or other bank accounts.
The car I am driving was paid for with cash, or a loan that was no more than three years, and I sure didn’t lease!
I am contributing at least 10% of my gross salary to a retirement plan at work, or I am saving at least that much in an IRA and/or regular taxable account.
I have a long-term asset allocation plan for my retirement investments, and once a year I check to see if I need to do any rebalancing to stay on target with my allocation goals.
I have term life insurance to provide protection to those who are dependent on my income.
I have a will, a trust, an advance directive (living will), and have appointed someone to be my health care proxy.
So how did you do?
If you answered yes to every item, congratulations. If you are working on improving on a few items, I say congratulations as well.
As long as you are comitted to truly creating financial security, I applaud you. If that means you are paying down your credit card balances, or are building up your emergency fun with automated payments, that’s more than fine. You are on your way!
But if you found yourself saying No to any of those questions, and you’re not working on moving to Yes, then I want you to stand in your truth. No matter how good you feel, you have some work to do before you can honestly know what you are on solid financial ground.