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Organizing Your Money – Part 2: Pulling and Analyzing your Credit Report

By Erik Folgate

A good habit to establish is reviewing your credit reports at the beginning of each year.  The best part is that it is now free to review your credit report from Experian, Transunion, and Equifax one time per year for free!  Go to AnnualCreditReport.com to view all three of your credit reports for free.  Be aware of other sites with similar domain names that claim to give you your credit report for free, but rather it is a free trial that will charge you money after 30 days if you don’t cancel the membership.  The most notorious site doing this is FreeCreditReport.com.  Here are three things to do when reviewing your credit report: 

Check for Mistakes

The first thing that I do is check for mistakes on my report.  Believe me, it happens.  One time I saw a Nieman Marcus card on my list of accounts.  I knew this was wrong, because I’ve never been to Nieman Marcus, nor would I be able to afford anything there!  Make sure that your personal information is correct, and make sure that all of the accounts on there are yours.  If you see a mistake, you can make a claim to the credit bureau to dispute the account as not owned by you.   It will take a little leg work, but you must make sure that only the accounts you own are affecting your credit. 

Look for the Bad Stuff

Next, go through the report and make sure there are no overdue accounts that you forgot about or collections that you were never aware of.  My one collections nightmare is when I pulled my credit report a year ago and noticed an $824.00 collection on my report.  The company that sent the bill to collections was Johnson’s Wrecker Service.  I was dumbfounded at how a wrecker service could charge me that kind of money.  I was sure that it was a mistake, until I started doing some research about the collection.  It turns out that a car that I supposedly junked at a mechanic’s shop in South Florida ended up fixing the car and reselling it to someone.  The mechanic never sent in the title to be changed into his name, so he sold the car to someone who ended up abandoning it on the side of the road.  The police picked it up and charged the impounding and wrecking fees to the name on the title — ME!  How is that for a nightmare of a collection?  This is why you need to check your credit report once a year!

Analyze your Debt Load

A credit report is a great way to analyze the debts outstanding against you.  It’s the only time that you can look at all of your debt accounts on one sheet of paper.  Compare your debt to income ratio, and use the credit report to help formulate your plan for getting out of debt. 

I am not one to worship the credit score, but if you want to pay to see what it is, go ahead.  Just remember that a credit score is a horrible way to grade your financial well-being.  Some people think that having a 700 credit score is such a magnificent feat, and it must indicate that you know what you are doing financially.  When it comes down to it, a credit score is solely calculated on how much debt, how many debt accounts, and the activity of those debt accounts.  It has nothing to do with how much MONEY you actually have.  If you worship your credit score, you’ll always be in debt and you’ll always borrow money.  One of my goals is to build a career and a financial portfolio that allow me to never have to borrow money again.  What are your thoughts on credit scores?  Do you think they are an accurate way to judge someone’s financial status? 

Erik Folgate
Erik and his wife, Lindzee, live in Orlando, Florida with a baby boy on the way. Erik works as an account manager for a marketing company, and considers counseling friends, family and the readers of Money Crashers his personal ministry to others. Erik became passionate about personal finance and helping others make wise financial decisions after racking up over $20k in credit card and student loan debt within the first two years of college.

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