Cost of living

Surprising Items in Your Credit Report

Cost Of Living

We all know how important credit scores are to our financial lives. The higher your credit score, the lower your interest rates on loans, credit cards and mortgages. Many landlords, and even a growing number of employers, according to the Society for Human Resource Management, are using credit information to screen applicants.

So how’s your credit? Chances are, you don’t know. Only one in five consumers check their credit reports each year. Many are often surprised by what they see, says Janna Herron, an analyst with Bankrate.com. “You might find an old bill that you forgot to pay that has since gone to a collections agency and is now showing up on your report.” These old bills--even smaller, so-called “nuisance” items--such as overdue library fines, unpaid traffic violations, utility bills from past residences, or overlooked medical fees--can quickly become a big problem, lowering an otherwise clean credit score by as much as 100 points, according to credit expert, John Ulzheimer, of Smart Credit. Over the life of an average 30-year mortgage, this one “slip up” could cost you almost $9000.

See Related Calculator: What is the value of reducing, postponing or foregoing expenses?

“Given that it takes so long to build good credit, it’s really important that you be vigilant, and maintain that good credit,” says Herron. It starts with checking your credit reports regularly. Go to annualcreditreport.com, where you can access your reports from Transunion, Experian and Equifax, for free, once a year. This is especially important because credit problems might not even be your fault. A recent government study showed that 10 million Americans had mistakes on one of their reports that could lead to higher rates.

The good news is that the credit scoring industry seems to be moving away from penalties for minor delinquencies. The most updated software ignores items less than $100, or delinquencies that have been resolved. But many lenders are still unwilling to forgive and forget. If you find a delinquency, pay it off, or negotiate a payment plan with your creditor or collections agency. Then, write to your credit agencies to make sure the settled account is reflected in your report. Old delinquencies, by law, will “fall” off your credit report after seven years.

See Related Calculator: Should I consolidate my personal debt into a new loan?

Have you made mistakes that have damaged your credit score? We want to hear from you. Follow me on Twitter @veragibbons and use the hashtag, #costofliving

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