Why You Should Ask For Your Free Credit Report

A large percentage of consumer activity is the US is done through credit, which is why your credit report is important since it can determine how banks and lenders respond to your request for loans. The information in your report contains the sum total of your financial history, including past and present activities and debt paying habits.

The US government, as mandated by the Fair Credit Reporting Act (FCRA), furnishes consumers a free credit report once every twelve months upon their request.  Since there are three nationwide consumer reporting agencies that are tasked to provide these annual credit reports, you can actually have three reports a year if you ask from each one of them.

There are many advantages to getting a free annual credit report.

First of all, it's free. So that alone saves you cash. But do not be misled by websites offering you "free" credit reports in exchange for buying some other services. The only authorized site for truly free credit reports that you are entitled to by law is AnnualCreditReport.com.

A free annual credit report contains all your financial transactions. Credit monitoring is a good way to prevent identity theft by detecting activities that do not belong to you and purchases charged to your account which you didn't make. By reporting them as soon as possible, you stop unscrupulous people from further using your credit lines. 

On the other hand, a credit report can uncover unpaid bills that may have slipped your memory. It could be a one-time transaction that you forgot about or a gym membership that you thought you had discontinued. By being made aware of such matters, you settle the issues before they balloon and incur very big interests.

By having a recent credit report, you can check if the information about you is current and up to date. Sometimes, there are changes in your circumstances which you may have omitted to update and your credit report does not reflect the change.

There are three consumer reporting companies that are obliged to give you an annual free credit report if you ask for it – Equifax, Experian and TransUnion.  There are minor variations in each report and asking for a report from each credit bureau at the same time will enable you to spot the differences. But the benefit of spacing them out by asking for one report from a company every four months, you can track changes and any new information that appears on the credit report throughout the whole year.

By asking for a free credit report, you become aware of problems that exist which can lower your credit score and may hamper your application for a loan. By correcting them in advance before applying for a loan, you increase your chances for approval. A credit score is a number that represents your credit worthiness or lack of it. It is arrived at through mathematical algorithms and is influenced by your credit history. A preferred score would be in the range of 720 and higher.

A high credit score can have a positive effect on your loan application. It does not only get your loan approved, it can also lower the interest rates they charge and you could save a few hundred dollars a month in lower interest rates.

Conversely, a low credit score is the outcome of poor credit payment habits and declarations of bankruptcies. Loan applications have higher interest rates by three to four percent or the loan application may get rejected outright.

Here are some tips to avoid a negative rating on your credit report and increase your free credit score to make your standing in banks and other financial institutions on a desirable level.

• Pay your bills on time. This sounds like commonsense but you'd be surprised how so many people forget their due dates. Aside from lowering your credit report, you are unnecessarily charged for late payment fees and penalties.
• Keep your credit card balance low if this is possible. A low balance is a sign of wise spending and being in control of your finances.
• Get free credit reports once every twelve months to view your spending history and detect inaccuracies or false entries.
• When you see inaccuracies in the report, have them amended at the credit bureau, the three nationwide consumer reporting companies and the merchant.
• Avoid accepting all the credit card offers you receive unless really needed.
• If possible, avoid taking out additional loans to pay for your credit card bills.

Now you know the importance of maintaining a good credit standing. Your use for it may come now or later but being prepared will always come in handy when you are filling out a loan application form and waiting for the bank's nod of approval.

Free credit reports give you the advantage of knowing where you stand on the credit rating among banks and lenders. Having this information at your fingertips gives you a chance to polish your credit image. When the time comes for taking out a mortgage on real estate property or a car, you can get the best deals in lowest interest rates and less documentation if you have a great credit report.

And if with just a few clicks of the mouse, you can have a free credit report, why not order for one now?