Building good credit habits and having excellent personal credit is one of the most important things we can do on our journey to creating wealth. The reason is simple: credit score is used by lenders to assign credit risk. The higher your credit score, the lower risk you are to the lender. Low risk= low rates. This is what you want when you are borrowing money. Now the difference between one or two percentage points may not seem like a big deal, but when it comes to large purchases like a house, that extra percentage point or two can result in you paying tens, if not hundreds of thousands of dollars more over the course of a thirty year mortgage.
If you have any credit established or not the very first thing you should do is order a copy your credit report from the three credit reporting agencies. They are TransUnion, Experian and Equifax. You can obtain a copy of each for FREE by going to Annualcreditreport.com and submitting a request. You will need to provide your name, address, social security number, and date of birth to verify your identity.
NOTE: use caution when obtaining your free reports. There are MANY websites claiming to offer a free credit report but they can be misleading. When you create an account they may ask for your credit card information. According to the Federal Trade Commisson, Annualcreditreport.com is the only website authorized for free annual credit reports.
Once you have a copy of all three credit reports, go through them to make sure all of the information is accurate. Fraud is rampant and the last thing you want is for fraudsters to be opening up accounts using your information.
If everything looks good, now would be a great time to take stock of your credit situation. It may be the case that you don’t know what accounts you have or what’s outstanding. If you are serious about growing wealth, from now on you will!
Remember to order your credit reports once per year and repeat this exercise. Think of it like the annual check-up at your doctor. This is your annual credit check-up.