The Most Sacred Financial Document
Planning is important to make sure your financial house is in order. It is vital to know where you are today, where you want to be in the future and to have a game plan on how to get there. Many times we overlook one of the most sacred financial documents when devising this plan and that is the credit report.
A credit report is the key or the roadblock to many of the financial decisions we make today. Think about it, large life decisions such as buying a home, a new car, any large purchase on credit, or simply obtaining a credit card rely heavily on this one document and the score that is affiliated with it. Having an excellent credit report and score will allow you the freedom and flexibility to utilize credit most effectively.
There are a couple things you should be doing on a regular basis to make sure your credit report is accurate and your score remains at a peak level.
- You are entitled to a free credit report every twelve months from each credit reporting company. This will not provide you with your credit score, but should be used as a tool to confirm the information on your report is accurate and current. There are many websites you can go to in order to obtain these reports and annualcreditreport.com is recommended from the Federal Trade Commission’s website.
- You should check your credit scores annually as well to make sure they have not changed significantly since the last time you checked, especially if you have not had anything adverse happen to your credit. Unlike your credit report, you are not entitled to free access of your credit scores annually. There are a few ways to obtain your credit scores. Some credit card providers (you can check with your current card providers) will provide you with your score and inform you as changes take place with your score for free. In addition, you can always use myfico.com and obtain your score from each of the three bureaus. This option will cost you roughly twenty dollars per bureau, sixty dollars for all three. You can also obtain a free score at www.creditkarma.com, but keep in mind the score you receive here will not provide you with the exact score from the bureaus. It will give you a good sense as to what your credit score is and where you stand versus other people, plus there is no fee for their service.
The credit report and its associated score is the holy grail of lending. It could very well mean the difference between an okay rate, better rate, and the best rate provided to potential borrowers. Depending on the size of the purchase, this difference could mean a savings of tens of thousands of dollars over time. As an example, according to Bankrate’s mortgage calculator the rate currently for a thirty year mortgage with twenty percent down for someone with a 740 plus credit score would be around 4.75%. For someone with a score between 640 and 659, the rate would be 5.375%. At first glance, this may not seem like a huge difference in rate but it would mean a $45,000 increase in cost assuming you purchase a $400,000 home and finance $320,000. That is real money and having the best credit score will save you every time you borrow.
I simply provided you with one example of where a great credit report and score will save you money, but think of the other times we borrow money. Imagine if you compound the savings mentioned above (for purchasing the house) and you saw similar savings when buying a car, paying for a child’s education, utilizing home equity for renovations, credit card rates and other ways of borrowing too. Not having the best rate could mean the difference in reaching your goals.
Making sure your credit report is accurate and you are maintaining an excellent credit score is vital to your financial success. We would be more than happy to assist you with any questions that you may have on this topic, including discussing your credit report and score. Feel free to contact us, Mitlin Financial, at (844) 4-MITLIN x12 if you or someone you know needs assistance in this area.
This article represents the opinion of Mitlin Financial Inc. It should not be construed as providing investment, legal and/or tax advice.