IIIIIIT’S GROUNDHOG DAY!!! It’s that most wonderful day of the year when we rouse a sleepy (and surprisingly amiable) overgrown rodent from his den just to hold him in the air so that we can look past his perch at the end of the arm of a guy wearing a costume to see if the sun is out or not. Then, based on that clearly and undeniably scientific observation, we forecast the weather for the next 6 weeks. Why, oh why do I even watch the Weather Channel?
OK, I get it. It’s tradition and it’s all in fun. People get a kick out of it and it draws tourism dollars to a small town otherwise overshadowed by Pittsburg, Philadelphia, and Hershey. But let’s be honest, the furry little guy is right a mere 39% of the time. Now the meteorologists on TV don’t seem so bad, do they?
I truly believe that, for most people, Punxsutawney Phil really is all in fun. After all, who would take a serious weather forecast from Anything with that much hair and buck teeth? We can use all sorts of tricks and traditions to try and predict the future. We even do the same with our money.
So what do you use to predict your future financial health? Do you simply watch the stock market? (Some might draw a close comparison to watching a groundhog for the weather.) Do just make sure you have money coming in or that there is something left at the end of the month? Are you putting all of your eggs in the lottery basket?
Do you know what other people are using to predict your financial future? Did you even know people are regularly predicting your financial future? It’s true and it’s much more scientific than checking in with the local groundhog.
People use your credit report to evaluate their future risk of doing business with you. Lenders will check it to evaluate how much of a loan you can afford and the likelihood that you will repay the loan. Insurance companies use your credit report to help determine your insurance premiums based on their risk in insuring you. Potential employers will use your credit report to help evaluate if you are going to be a low-risk addition to the company.
That’s a lot of people with a lot of life-impact predicting your future based on your credit report.
So how does your credit report look? Have you even checked it lately? There are free and pay services out there that offer credit monitoring, but I am not aware of any that actually offer the full credit report. For example, when I last pulled my full credit report from Experian, I got a 28-page report that detailed every loan I have had in the last ten years and even every payment I have made. For that extent of report you want to directly access your credit report from any or all of the three main credit bureaus.
The three bureaus (Experian, Equifax, and Trans Union) all keep information about your financial past. The government, realizing the potential impact of your credit score on your life, has guaranteed that you get at least one free report from each of the three bureaus each year. It is usually easiest to access those through www.annualcreditreport.com, which the government set up for your access. Enter your information, answer a few questions, and you can see what everybody else is seeing (with your permission) about you.
While the credit report system is certainly much more reliable than a Pennsylvanian groundhog, there are still occasionally mistakes. These can be honest mistakes made the people that provide and enter information. These can also be other people taking out loans on your behalf (aka: id theft). This is why it is so crucial for you to regularly check your credit report. If there is information that you feel is incorrect, you can dispute those items through the link in your electronic report, by phone, or by snail-mail. However you choose, make sure you do it. The predictions of your future are depending on it and if you have bad information, your report will be as accurate about the truth as Punxsutawney Phil.
So what exactly do the credit bureaus track on your behalf? They look at what credit you have available (credit limits), what debt you are carrying (how much you actually owe, how long you have had the loans, what types of loans you have, how many loans you have, if you have other negative public information available (unpaid tickets, back child-support), and even who else is pulling your credit report and when.
Do not get your credit score confused with your credit report. Your credit score (the FICO score is used by nearly all lenders) is a three digit summary of your credit report. Because it is so easy and what lenders initially look at, people seem to go as crazy over their credit scores as they do over a groundhog predicting the weather. I’ll tell you it is about as silly too.
While lenders really do put a lot of weight on your score, it really isn’t the whole picture. Yesterday was another sacred day for many Americans – Super Bowl Sunday. For comparison, just looking at your credit score is like watching the Super Bowl by just watching the score ticker. Had you done that, you would know who won, but you would be completely clueless as to how they got there. You would have missed the Seahawks’ last-minute drive to the goal line only to turn it over on an interception. You would have also missed that they would have forced the Patriots to move the ball until one Seahawk was called for Encroachment, allowing the Patriots to simply kneel on the ball and run the clock down. That’s a whole lot in just 20 seconds of play that you would have missed if you were just watching the score.
Do yourself a favor and forget about your score. If you pay attention to your credit report and ensure it is accurate and up to date, your score will be just fine. By the way, it will save you money as well since you don’t get a free credit score like you do the credit report.
Not sure what that report all means? Not sure what to do about what is on there, truth or not? There is help available. The truth is that anything that can be done to fix your credit report, you can do for free. Our counselors can give you a little education and get you headed in the right direction. Give us a call to schedule an appointment. If you are looking to buy a home, we have grant money to cover the cost of that appointment.
If you want the truth, skip the groundhog and check your credit report. The other people making important decisions about your future already are.
written by Breck Miller