You may have need to take any type of loan be it mortgage loan, car loan, education loan and business loan among others. Even if you are not a regular borrower from the bank or any other financial institution, there is need for you to monitor your credit report.
Doing this, experts say will enable you to ensure that no one has stolen your identity and that all your information is correct and intact.
Miriam Caldwell, personal finance specialist, says actively monitoring your credit is just one way that you can work on handling your credit responsibly. This she says will protect you from identity theft and makes it easier to protect your assets and qualify for a loan if you need to take out a mortgage or have a financial emergency.
According to her, there are two different ways that companies look at and monitor your credit when they are considering giving you a loan. The first is your credit report or credit history. The second is your credit score. If you are interested in managing your credit responsibly, you need to consider both ways and do everything you can to make sure that you have both a good credit history and a good credit score. Your credit history will definitely affect your credit score.
Taiwo Ayedun, chief executive officer of CR Services (Credit Bureau) plc had said Credit scores are determined by a variety of characteristics such as payment history, outstanding debt, type of credit exposure, new credit enquiries, number of delinquencies, etc. Scoring systems are designed on a simple premise that past behaviour predicts future behaviour. Hence, credit scores are not the only deciding factor in making lending decisions and in fact creditors can decide to override a score based on relevant information not considered by the scoring system. Overall, in developed economies, credit scores are the norm and creditors use such techniques to instantly evaluate product offerings to customers thus enabling fast easy access to credit to improve standard of living and stimulate economic growth.
Your credit history is a record of your payments, loans, and other things that involve making payments on time. The banks you have credit cards or loans through will submit your payment history and balance information to the credit bureaus. This list should include all of your active accounts, the number of times you have had a late payment over the last seven years, the amount of credit available on each account, and any information on accounts that have gone into debt collections. Additionally, if you are late on your utility payments they may report it to the credit bureau as well, Caldwell said.
She said there are three different credit bureaus and not all of the institutions report to all of them. You should check your credit report at least once a year, to make sure that no one has stolen your identity and that all of the information is correct. You can check your credit report from each bureau for free once a year. You can stagger how often you check the reports to monitor your credit more closely. You will need to dispute any incorrect items on your credit report and file a police report if you find an account opened that you did not authorise.