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The Financial Impact And Truth About Your Credit Report

Check your credit report and save money

Checking your credit report for errors falls into the same category of regularly flossing your teeth. It's something that everyone knows that they should do, but don't always get to.

More than 60 percent of people did not review their credit report and another 55 percent did not know their credit score, according to the National Federation for Credit Counseling 2012 Financial Literacy Survey. This statistic is especially concerning because a recent report released by the Federal Trade Commission found that errors affecting the overall credit score were on 21 percent of credit reports examined.

Check Your Credit Report Regularly

If you do not check your credit report regularly, you are increasing your risk of being turned down for loans, paying higher interest rates and suffering losses due to identity theft.

Your credit score will directly affect your interest rate on any major purchases

George DeMare, principal at Midwest Mortgage Capital, said loans are given out using a risk-based model that rewards consumers with better credit scores with lower interest rates because they represent a lower lending risk for the financial institution. This means that you may unknowingly have an error that reduces your credit score and pushes you to a higher interest rate. If you are purchasing a $300,000 home with a 680 credit score, you are going to pay over $70,000 to $80,000 more (due to the higher interest rate) than you would have paid with a 780 credit score, DeMare said.

Denis G. Kelly, president of IDCuffs and author of The Official Identity Theft Prevention Handbook, said that reviewing your report can also alert you if your identity has been stolen. While some damage has already been done at that point, by catching the thief early you can prevent further damage by putting a fraud alert on your credit report.

Request your credit report every 4 months

How to Check Your Credit Report

Since you can get a free credit report from each of the three credit bureaus every 12 months, Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling, recommends requesting a copy from a different bureau every four months. Even though all creditors do not report to all three bureaus, by staggering your reports, you can catch most of the errors that reduce your score, Cunningham said.

DeMare said that he often gets customers asking about the difference between and is the only site that provides truly free credit reports, DeMare said. You should only request your credit report through

Once you receive your report, go through each item carefully and determine if you opened the account, if any late payments are accurate, all credit limits are accurate and that any information has not outlived the seven-year limit. Cunningham cautions consumers from expecting they can have negative information removed if it is correct. Only inaccurate or fraudulent information is eligible to be removed. If you share the same first name as someone else in your family, such as a father or son, you should also verify that none of their information or credit history shows up on your report.

Additionally, Kelly cautions people to not overlook small errors such as misspelled names or an incorrect birthday because they can actually be a sign that you could be a victim of synthetic identity theft. A common way to steal someone's identity is to open accounts and loans using a slightly different name or birthday which initially opens a new credit file until it is eventually merged with the person's main file, Kelly said.

Go to the source for your reports, not to creditors or merchants

What to do if You Find an Error

DeMare recommends consumers first address any errors that they find with the merchant or financial institution that provided the information. Most people initially start their dispute with the credit bureaus, but since the bureaus will contact the merchant you should make sure that the debt is cleared up with the creditor before filing a claim, DeMare said. After you address the issue with the creditor, get the resolution in writing and then contact the credit agencies. According to the Fair and Accurate Credit Trade Act, the bureaus then have 30 to 45 days to investigate and respond to the claim.

Cunningham said people are very motivated to improve their credit scores and will go to great lengths to chase a few points. But it is important to realize that your credit score is based on the contents of your credit report, Cunningham said. The place to start improving your credit score is by reviewing your credit report for errors.

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