When it comes to understanding your credit, it can feel as complicated as trying to solve a Rubik's cube. Frustrated by this confusion, many consumers neglect their credit, which can have a devastating impact on their financial futures.
A Consumer Action study recently revealed that 27 percent of Americans have never checked their credit report. That's alarming, because it's estimated that a large numbers of consumers have errors on their credit reports that could damage their credit.
I found this out several years ago when I found an error -- a canceled account that was being reported as delinquent -- hurting my credit. In my research, I have identified three sneaky things that are hurting other people's credit, too. Surprisingly, they could be fixed in 15 minutes or less.
First, you need to get your credit report, and you should go to AnnualCreditReport.com. From this site, you can request your free credit report once a year from the three major credit reporting agencies -- Equifax Experian and TransUnion. You can also access your credit score there, but you'll have to pay a small fee.
To get a free credit score, you can go to Credit.com or Creditkarma.com. Keep in mind that these two as well as a lot of other free sites offer a consumer education score, which isn't your actual FICO score. This confused even me when I sought to find my real credit score. Your FICO score changes daily, so getting your credit scores from these free sites will give you a good gauge of approximately what your credit score is.
1. Wrong Information
The wrong personal information on your credit report could hurt your credit. This could be things like your name, your home address, where you've worked in the past or even your Social Security number. How does a wrong address hurt your credit? Your information may be mixed up with someone else's, especially if you have a common name, or are a "Jr." or "Sr." Or it could indicate identity theft -- and that could really wreak havoc with your credit. By reviewing your credit report, you'll be able to quickly see if there's any information that needs to be updated or changed.
2. High Balances Compared to Limits
Another sneaky thing that could hurt you is your credit card balances -- even those you pay in full. How can a credit card that you pay off hurt your credit? Issuers typically report your balances as of the statement closing date. But then those cards aren't due until about a month later. So in the meantime the balance on your reports may look high in comparison to your credit limits.
Generally you want the balance on each card to stay below 20 percent to 25 percent of your available credit. If you have a retail card with a small limit or a reward card that you use to pay for everything to earn lots of points, then this factor could come back to bite you.
So you need to either pay your charges off before the statement closing date or ask for a higher credit limit. Of course, a higher credit limit should not be an invitation to overspend. You won't improve your credit scores if you get in over your head with debt.
3. Outstanding or Delinquent Bills
The third sneaky thing that could hurt your credit score could be outstanding or delinquent bills. I canceled a gym membership when I moved, and it wasn't until I checked my credit report several years later that I found out the gym was marking me as being delinquent, which was hurting my credit. You'll want to check your credit report to make sure that you have no outstanding bills or any delinquent bills that you need to get addressed.
For my delinquent gym membership, I contacted its home office and explained that I had moved and their closest location was more than hours away. After that short and painless phone conversation, it removed the delinquency, and my credit was repaired.
Review your credit report and make sure you're not being marked for anything delinquent that could be damaging your credit. This could be old gym memberships like mine, credit cards or medical bills.
"I've seen numerous situations where consumers were shocked to learn that medical bills they thought their insurance had taken care of were on their credit reports as collection accounts, " warns Gerri Detweiler, director of consumer education with Credit.com. "It doesn't matter if the amount is small. Any collection account can drop your credit score 25, 50, even 75 points or more."
Stop letting these sneaky things hurt your credit. Check your credit report for errors and make sure you credit score isn't being hurt unnecessarily.