Call it credit phobia.
About 14% of adults don’t check their credit reports for fear of what they’ll find, according to one recent online survey of over 500 consumers by WalletHub. Younger consumers are more likely to harbor this aversion, as are women.
“It can be the fear of the unknown,” said Jill Gonzalez, analyst at WalletHub. “Or it could be because it will reinforce what you already know – that you are already heavily in debt or past due on your accounts. That’s a pretty common reason.”
Yet avoiding looking at your credit report – which usually includes information on current and past debts – carries a major risk: if it contains errors, your credit score could be lower than it should be. And that means when you go to apply for your next loan or credit card, you might be paying more interest than you would without the mistake.
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“When your score is mistakenly lower, it means you’re not getting the best deals,” Gonzalez said.
Generally speaking, the higher your credit score, the lower the interest rate you may be entitled to on a variety of consumer debt, including mortgages, auto loans, and credit cards. Credit scores are in a range of around 300 to 850, with ratings above 700 being considered good or excellent.
A person with a credit score between 580 and 669 will pay about $ 45,000 more in interest over their lifetime on loans and credit cards compared to a consumer with a very good credit score of 740 or more. more, according to recent search by LendingTree.
No matter where your score is, spotting an error in your credit report could increase your count quite quickly. About 20% of reports contain an error, according to data from the Federal Trade Commission.
Inaccurate information may stem from errors in the information provided by a creditor or from an error made by a credit reporting company, or from fraud, i.e. someone using your data to open a credit card account.
Plus, knowing what’s on your report and understanding its impact on your credit score gives you the power to improve your number.
For example, about a third of your score is based on your mastery of your bills. Lenders like borrowers who have a good on-time payment history.
“For people living paycheck to paycheck, this may be easier said than done,” Gonzalez said. “If you’re not, you can automate your payments. It keeps you from paying late.”
Another about a third of your score comes from using your credit. That is, the percentage of your available credit that you are actively using. The lower this share, the better.
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“Anything over 40% will negatively impact your score,” Gonzalez said.
It’s also important to know how many years you’ve already borrowed and paid off money. So if you are just starting out and need to build up credit you can see if anyone in your life (i.e. mum or dad) will allow you to be listed as an authorized user on any of his credit card accounts.
Your credit is also important for reasons beyond interest rates – some landlords and employers will check the credit reports of potential tenants or employees.
“If they check out and you have good credit and another person has bad credit, you’re probably going to get that apartment or that job rather than the other person,” Gonzalez said.
You should check your credit report at least once a year, if not more, she said.