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.

I understand that process of course – but it can be costly.

If you go that route you may not get the best credit terms – or you might even get rejected.

Of course when that happens, that’s the time the light bulb turns on and you start to consider what went wrong and what’s in your credit report.

While you are entitled to know what caused this negative outcome, what’s the difference at that point?  You may not have the time you need to dig deep and correct the problem.

That’s why what you really need to do is check your credit record and try to improve it long before you fill out a credit application.

Why you need to give yourself time to focus on your credit report before you apply for credit

Get your credit report – not just your credit score.  Read it carefully and look for mistakes, errors and bonafide problems.

If you have never reviewed your credit file before it can be intimidating.  I want you to take your time with this rather than feeling rushed.   This is why the sooner you review it – the better.

First, look for errors.  If you think the people who put your credit report together couldn’t possibly make a mistake – think again.

Depending on who you ask,  from 10% to 25% of all consumers have mistakes on their credit reports.

That sucks because you pay higher rates on borrowed funds (or get declined) just because some slob didn’t do their job.

Inspect your report carefully.   Are any credit card listed twice or in error?  Does the report show an old balance that you’ve long-since paid off?  What other mistakes can you find?

It’s not a huge task to clean up credit mistakes. But it takes time to clean up these kinds of errors and it’s a major reason why you need to check your report well before you apply for a loan friend.

Your credit report is your road map to a better financial future

Your credit history really is the key to your financial future because it tells you where you need work.  That’s why it’s crucial that you check it before you apply for credit.

After you clean up the errors, it’s time to clean up your credit act.

Look through your credit file to see where you could improve your credit. Do you have some late payments?  Do whatever you have to to make payments on time going forward.   No excuses Pilgrim.

Are you tapping in to a good chunk of your available credit?  That’s called a high credit utilization and it’s no bueno.  When someone is already using almost all of their available credit, creditors start to get worried.

That’s because it indicates they are living off of credit rather than income. If that describes you, you may not even be aware of this right now because sometimes increased credit utilization just sort of creeps up on you.

This is another reason why it’s so important to check your credit file before you apply for credit.

If you pay down some of your debt your credit utilization will go down.  That means creditors will breathe a little easier and it also means your credit score will improve.

Go through your credit record, and acknowledge the problem areas. Take 30 to 90 days to work on improving your credit score.  If you work smart and are committed, you should see improvement over this time.

This is an especially important step to take if you want to apply for a major loan such as a mortgage or if you want to refinance your current mortgage loan.  Do you see what I’m talking about muchacho/a?

If you make the effort a few months before you apply for credit, you might end up cleaning up your credit score enough to push your score higher and thereby getting a lower rate on that mortgage.

Think of how much money that could save you over the life of the loan?  It could run into the thousands of dollars.

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 and your financial future. Lenders, insurers and others check your credit report before making decisions that can affect your pocketbook, employment, insurance and beyond.

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.