The Importance of a Good Credit Rating

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unsecured loans identity theft credit scores credit report credit history credit card debt

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The following is a guest post. Enjoy! 

According to a new report by Avivia Family Finances, the average family owes £7,944 ($12,500 USD) in unsecured loans on credit cards, loans, overdrafts, store cards, etc. This figure represents a huge jump from the 2011 level of £5,360. It also equates to approximately 32% of the average per capita net annual income in the UK. 

The Importance of Keeping Track of Your Credit Report/Score

Any loan you take out, no matter how small, is recorded on your credit history for a sizable amount of time. Furthermore, how and when you pay your debts off is also registered. Failure to make payments on time and in full results in a poor credit rating. But how do you know what your credit rating is? Have you ever even told yourself, ‘I need to check my credit’? The answer is probably no. Most of us don’t think about our credit rating until we are refused credit based on its result. However, by this point, it is too late for you to do anything about it, at least for the loan you are trying to acquire at the time.

Keeping up to date with your credit score, which will fluctuate over time, is essential if you want to be offered the best interest rates, loan deals, mortgage offers promotions and products. A poor score means you won’t get the loan you want and worse still you might be refused a mortgage so you can’t get that house of your dreams. You can check your credit score online. New customers get a 30-day free trial, which includes a report of your full credit history as well as text messages or emails if/when your credit rating changes.

The Threat of Identity Theft

Your credit rating will change if you miss or under pay payments or conversely, if you pay off all of your debts. Therefore, you are the one in control of your credit report. However, identity theft is a growing problem throughout the globe, and identity criminals are using ever more advance methods of stealing your personal information and using it for their own financial gain. They have no qualms about running up huge debts under your name, and this will obvious have a detrimental effect on your credit rating. 
However, on average it takes 15 months for a person to find out they have been a victim of identity theft. This is why regular checks of your credit history are such a good idea. The sooner you find out about identity theft, the sooner you can act on it and do something about it. You can find more information about identity theft on the Crime Stoppers website.

How about you all? How often do you check your credit report and/or score? What service do you use to check it? Do you have to pay a fee, or do you view it for free?


Are you actively doing anything now to protect yourself from identity theft? 


Share your experiences by commenting below!

Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article.

  • Good post here. It’s always worthwhile to get a reminder every once in a while about remembering to check my credit report/score occasionally. 
  • Right now, I probably check my credit report less than I should (once a year is generally how often I check it). When I do check it, I do so for free using AnnualCreditReport.com. Unfortunately, you can only view your credit report (not score) for free once per year. So, if you want to check in more often, you have to find another paid service to help you. But, they are easy to find.
  • I was also recently exposed to a service that claims to let you check your credit score for free – Credit Karma. However, one of my fellow blogging friends (Wealth Informatics) pointed out that the score reported on Credit Karma is not your actual FICO score, but rather something called the Transunion TransRisk score. The problem with using this credit score as your sole source of information is that not all lenders will use this score when assessing your ability to lend/repay money.
  • Regarding identity theft, this is becoming more of a prevalent problem in today’s society. 

***Photo courtesy of Image: David Castillo Dominici / FreeDigitalPhotos.net


Comments

  1. A good credit rating is so important! Many employers have started using it against people during the hiring process. This is why financial responsibility is something every college student needs to learn before leaving school.

    • Thanks for sharing Y&T! I have heard the same thing. Do you know of anyone personally that has had their credit history used against them for a job?
      My recent post Sensible Spending and Saving For You And Your Family

  2. I pull people's credit every day I would say the average score that I see is 690. It is extremely important to have a good score. Most banks check your credit score even when opening a simple checking account. I agree with youngandthrifty on the fact there should be more classes geared toward teaching students financial responsibility.
    My recent post My Favorite Financial Apps

  3. It is important to check periodically to find incorrect information. Many years ago there was an incorrect negative on my report. I filed the proper request to have it investigated and later confirmed it was removed. About 2 years later, the SAME issue was reported again and back on my report. So now I pull a free report from the 3 bureaus each year.
    My recent post It’s Tax Time

    • Crazy to hear JB that they made the same mistake twice! Good thing that you were able to catch it.
      My recent post Sensible Spending and Saving For You And Your Family

  4. This is something I need to get better at. I need to order my credit report and score at least once a year. I used to but I stopped a couple years ago
    My recent post Business Survival in a Down Economy

    • I tend to forget this kind of stuff too Evan. However, I've started using more Outlook Calender pop-up reminders, and that seems to help keep me on track.
      My recent post Sensible Spending and Saving For You And Your Family

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