Why You Must Check Your Credit Record before Applying for Credit

Many of us don’t think about checking our credit records until after we’ve applied for credit — and possibly been denied. Only after we end up with terms we didn’t want or have the application rejected do we think to wonder what in our credit record, might have caused such a negative result. While you are entitled to know what score was used in your negative outcome, it’s almost too late at this point. What you really need to do is check your credit record before you fill out a credit application.

Your Credit: Room for Improvement

Instead of receiving a nasty surprise, you can check your credit report ahead of time. Look through your credit file to see where you could improve your credit. If you have some late payments, work harder to make on-time payments. If you have a high credit utilization, you know that paying down some of your debt will help you improve your credit.

Go through your credit record, and acknowledge some of the problem areas. Take 30 to 90 days to work on improving your credit score. This is especially important if you are planning to apply for a major loan such as a mortgage, or if you want to refinance your current mortgage loan.

On top of that, you can look for errors. In some cases, mistakes on your credit report can lead to a decline of credit. My husband’s credit report once had a credit card listed twice, and mine doubled up a student loan. It looked as though we had more debt than we did, and it could have been a deal breaker. Checking your report can ensure that you have time to remedy mistakes that could make obtaining a loan difficult.

Looking ahead and being prepared can help you make sure that everything is in order and avoid unpleasant surprises.

Catching Identity Theft

Another good reason to check your credit record before applying for credit is to catch identity theft. If someone has opened up unauthorized accounts in your name, you need to know — and get the problem resolved. Check your credit record ahead of time, and look for fraudulent accounts. You can begin cleaning up your credit report and take appropriate steps to prevent it happening again.

While you may not catch the thief, you can file a police report, contact the FTC and have a fraud alert placed on your credit report. That way, when you apply for loans you can show that someone else has messed with your credit. This can help improve your chances of being approved for a loan, even if there are some problems with your credit record.

Bottom Line

Your credit record is your financial reputation. Lenders, insurers and others check your credit report before making decisions that can affect your pocketbook. This makes your credit record extremely important. Take the time to check it before you apply. You can fix problems and ensure that your credit is in tip-top shape so that you get the best possible rates.