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I believe that the #1 reason why most people want good credit is to get a credit card and to buy things that they can't afford, and I think that's crazy. You're worthiness as a person has nothing to do with the credit report. If your self-worth is related to your credit score then you've got a bigger problem than your credit report.
I'm going to talk about your credit report but it's with the understanding that it's up to you to decide if it's important and why it's important to you. I don't care about your credit. I'd rather you have $1,000,000.00 and live happily off the interest the rest of your life. Okay; the credit report.
The Credit Report - What Is It?
The credit report is a simple, easy to understand statement of your past financial dealings. It is always accurate, meant to be fair and should never be questioned. Don't believe it for a second!
There are over a hundred different ways of reporting negative information about you and less than ten ways to report good information. Why? The only reason the credit bureaus can make any money is by selling bad information; who would pay for good information?
Things will get better over time. Chances are if you commit armed robbery you will be out of prison many years before the information about you being 10 days late with a credit card payments falls off your credit report. Oh, if you miss a payment you're a bad, bad person.
Credit card companies will love you if you have bad credit. The credit card companies will love a bad, bad person who misses a payment or two so much they'll give them credit card, of course it will have a much higher interest rate and higher fees. Declared bankruptcy? I bet you're going to be getting credit cards in the mail. Hey, you can't file again for several more years and you've already proven to them that you can get into debt, you're just the person the credit card companies are looking for.
How it Gets Put Together
Every month over 4.5 billion pieces of data are reported by financial institutions and creditors. They report on the type of credit (e.g. automobile loans, credit cards, mortgages), their outstanding balances, bill payment history, and any collection actions taken. Public information such as bankruptcies, court judgments, foreclosures, lien, and overdue child support are included along with information that you supply when you apply for credit.
Who Uses It
Who uses your credit report? Well, financial institutions that need to make a decision on your credit/debt worthiness, of course. But also a potential employer, landlord, or insurance agency may look at it to make a decision as to whether they want to do business with you. Fair? Tough! They're going to use it anyway.
So yes, if you are in the position where a judgment will be made about you by one or more of these businesses, it's a good idea to have as good of a credit report as possible.
How Accurate Is It?
Accurate? Well not really. As reported in October 2004, according to a report by the National Association of State Public Interest Research Groups, the credit bureaus got it right 21% of the time. Yep, 79% of the credit reports the studied had errors. While many of these errors were bad credit information that shouldn't have been on the report, there were also many times when good credit information was omitted.
So do you want to bet that your report is one of the 21% or do you want to do something about it?
The Credit Reporting Agencies
The credit reporting agencies are your friends. That's why they have over a hundred different ways of reporting negative information about you and less than ten ways to report good information. Chances are if you commit armed robbery you will be out of prison many years before the information about you being 10 days late with a payments falls off your credit report. Oh, if you miss a payment you're a bad, bad person.
The only reason the credit bureaus can make any money is by selling bad information, who would pay for good information? The credit card companies will love a bad, bad person who misses a payment or two so much they'll give you credit with a much higher interest rate and higher fees.
So, like it or not, we’re going to have to deal with the credit reporting agencies. When dealing with them the biggest mistake you can make is to not know what’s on your credit reports. Yes, reports. You can’t just look at one and know what’s on the others. You have to get all three reports. Of course they format the reports in different ways so then you have to learn how to read them. But you must learn, as not to learn is akin to giving them permission to report inaccurate negative information about you.
Once you have your reports and know how to understand them, you must be vigilant because new information is constantly being added to them. Is it accurate? The only way to know is to check your reports on a regular basis. Remember, there maybe companies that you are doing business with that are looking for a black mark on your report so that they can raise their rates on your account. The only way you can win this game is to stay on top of it.
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