Poor credit can lead to big problems
Financial readiness is a lot like driving an automobile. If you don’t perform regular preventative maintenance, it’s bound to cause problems.
In the case of finances, checking one’s credit report is preventative maintenance.
Credit reports and credit scores are different but directly affect one another. By law, individuals have an opportunity to review their credit report three times a year. It’s the first thing a person should do before applying for a credit card or taking out a loan for large items such as a car or house.
Consumers can request a free copy of their credit report each year at www.annualcreditreport.com. They can also receive a free report if requested within 60 days of being turned down for credit.
“There could be something on the report that doesn’t belong to you, so reviewing it gives you a chance to check it before applying and potentially being turned down for a credit card or loan,” explained Barbara Brown, personal financial readiness specialist, Financial Readiness Program, Army Community Service.
Credit reports are a detailed report of a person’s debt history, inquiries about credit applications, personal address and places of employment. In most cases, debt seven years and older disappears from credit reports and gets sent to a third party collections agency, which then tries to collect the debt on behalf of company. Other cases may take longer and require action to disappear.
“I’ve seen some where they’ve had income taxes on their credit report, and that was filed through the state,” Brown said.
“The federal government put a lien on the report, and so it continues to stay there until you take action on that lien and resolve it.”
Good debt history helps build a good credit score. Bad credit history can have detrimental effects to a person’s future, so it’s important to take action and dispute anything that looks suspicious or doesn’t belong to you. If you know the person responsible for a debt that doesn’t belong to you, you have the option to sign an affidavit agreeing to the perpetrator being prosecuted.
“It’s so important to retrieve your credit report three times a year, because any erroneous information on your credit report can get corrected,” Brown said.
Failure to do so could lead to poor credit, accounts in collection, and even affect the ability to receive or retain one’s security clearance.
Once your credit report is satisfactory, get a copy of your credit score. Credit scores are used by creditors to determine if and how much money to lend a person. They are also used to determine amount required for down payments, annual percentage rates, and can affect a person’s employability in some career fields.
“A lot of employers are checking your credit report,” Brown said. “Employers have a right to turn a person down due to a poor credit report.”
Just as there are several things that affect one’s credit score, there are also many ways to improve it. And Financial Readiness can help.
“You’ll pay anywhere from $400 to $600 for a personal finance class, depending on the school, or you can see a financial advisor here absolutely free,” Brown said.
To schedule an appointment with an ACS financial advisor, call (706) 791-1918, or stop by Room 172 in Darling Hall.