Your credit report is what car dealers, apartment complexes, mortgage companies, and even potential employers use to judge your trustworthiness. The car dealers and mortgage companies want to know if you will run away without paying. Potential employers want to know if you are a risk for fraud. It also allows your potential employer to gauge your stability. How long do you stick with your jobs? How long have you lived in your current home?

Your credit report is vital to your ability to purchase some items and your credit score is the primary metric used to determine what interest rate you will pay for any loan you apply for. These credit reports are not always accurate, in fact they are in error a disturbing amount of the time. Sometimes its a false late payment from a credit card company; sometimes is a false ding to your record because someone with a similar name had a problem.

My Experience with my Credit Report

My personal experience is that 1 credit card I had didn't read my handwriting very well and now there is a whole parallel credit history for that mis-spelling of my name. So it's wise to check your credit report frequently.

Not All Mistakes are Benign

If someone gets ahold of your social security number and a few additional pieces of information then it becomes easy to commit fraud in your name. Common types of identity theft include

• bank accounts,
• credit cards,
• utilities, and
• loans

The earlier you find the fraud the less damage the criminals can do to you. Also, it can take years to clean up your credit after a problem. In some cases your credit is never the same.

My opinion is that the credit reporting agencies have no incentive to help you clean up your credit so long as identity theft remains relatively small by comparison to those applying for credit. It is certainly better for them to report you as a risk if you are not then it is for them to report you as safe when you are not.

Your credit report should come from the 3 major credit reporting agencies

• TransUnion,
• Equifax, and
• Experian

The credit report should contain 4 important sections. Each contains one piece of your total credit picture.

• Account Report Summary: status, # of open accounts, # of closed accounts, outstanding balances, historical trends, and any delinquent accounts
• Public Records: bankruptcy, court records, liens, judgements, child support
• Credit Inquiries: anyone who has requested a credit report on you in the last 2 years
• Detailed Credit History: how much credit are you using, loan payments, outstanding credit card debt, payment history

Note: Carefully check each report for common errors such as misspellings, name confusions, and incorrect information.

As mentioned above, your credit score is the primary factor in determining what interest rate you will pay when financing a car or home.  It also effects you insurance premiums and your ability to get a job.

Obviously, a good score saves you money when you finance a car, home, refrigerator, etc.  If your score is below 650, your future finances may be significantly affected.