Reasons the Credit Rating should be Checked Regularly

There are a number of financial activities that a person should do on a regular basis. One of these is to check the individual’s credit rating. A credit rating is a number that is used by lenders to determine whether or not to extend credit to that particular individual. Three main agencies furnish this number which ranges from three-hundred, a high-risk score, to nine-hundred, a low-risk score. This score considers a person’s percentage of credit being used, history of available credit, types of credit and payment history. These are all combined to produce a single score that is designed to provide an accurate assessment of a person’s worthiness to receive credit; it also helps indicate how likely an individual is to pay off his or her debts. Why is it so important to regularly check the number being reported by each of these three major agencies?

No system of record keeping is perfect. The calculation of a credit rating relies on accurate data being received and processed accordingly. With the large volume of transactions that an individual is involved in, it is quite likely that something will be missed, entered improperly, misidentified, or simply be erroneous. Very similar names can be confused and a person end up suffering as a result. Taking the time to peruse the data being used by each of the appropriate agencies will help to turn up wrong information or reveal that information that should be taken into account that has not been. Assuming that a system will never fail is a foolish choice and one that could prove to be very damaging financial and personally.

In addition to mistakes, fraudulent activity can be identified through a careful review of credit rating data. The credit markets are prime targets of people who wish to use them to acquire merchandise without having to pay for it. Impersonating another person and opening credit lines with their identifying data is a crime that can be difficult for individuals to detect. Taking the time to ensure that all the data used by a credit rating agency is accurate will help diminish the impact of those perpetuating credit fraud. It also helps identify such people and assists with obtaining information that can lead to their arrest. Failure to guard against credit fraud provides an opening for people to take advantage of others; the result can be financially damaging to many. Credit markets rely on trust, and the higher the level of fraud, the less opportunity they have to provide credit to those who truly need it.

Carefully perusing the data used by credit rating agencies provides debtors with a good overview of their financial dealings. Being willing to look at this data with a sharp eye helps bring to light ways in which credit is being used or abused. Using credit can be a smart financial move when it is done in a wise and proper manner. There are some situations where using credit is the right choice and the fiscally proper one. Yet, credit can also be a temptation to spend money unwisely and to create a financial hole too large to work out of. Credit data are objective and taking the time to study these reports will provide a glimpse into how a person is handling credit and may help to stop a cycle of choice that could lead to financial ruin. Credit rating data can also help to show how credit can be used more properly to place a person in a better financial situation.

Checking a credit rating is not limited to those who have been denied credit. While certain levels of credit are so low that a person cannot attain a credit line, most people have a credit rating that enables them to attain credit under some terms. The terms of credit, particularly the interest rate charged, is significantly affected by a person’s credit rating. High interest payments are one of the key factors that can lead a person into a poor financial situation. Reducing interest payments is a simple way to reduce overall debt and help a person to improve his or her financial burden. Improving a credit rating, sometimes even just a small amount, helps bring interest rates down and lessens the burden of debt that a person takes on. Credit is a useful tool as long as the burden it produces is not too high. Making credit more useful and available is fiscally important, and raising an individual’s credit rating is a simple way to do so.

Credit ratings can seem mysterious. The agencies involved often seem remote and distant from a person’s daily life. Yet, a person’s credit rating is central to allowing him or her to achieve the financial goals that have been set. Getting credit on good terms can make all the difference in fulfilling personal goals and raising a person’s credit rating. Moreover, the better the terms, the more likely the goal of a higher credit score will be accomplished. Regularly checking credit scores issued by the various agencies is essential to identify mistakes, fraud and misuse that may be contained in the data used by the agencies to produce a particular number. Those who take the necessary time will be rewarded with more peace of mind and opportunity to get credit on good terms when it is needed.