Start Your Financial Planning By Reviewing Your Credit Report

Friday, June 7, 2013

Start Your Financial Planning By Reviewing Your Credit Report

Keeping an eye on your credit report is one financial task that remains important throughout every stage of life, from just starting out through to retirement. Any serious financial planning requires that you first understand your current situation. Reviewing your report on a regular basis will also allow you to see how closely you are adhering to your goals and what effects your efforts are having on your overall credit profile. I perform a cursory review of my credit report at least once a year to remain aware of my credit score and overall rating. 

Image credit: michaeldb / 123RF Stock Photo

I recently watched an episode of the Martin Lewis Money Show that discussed exactly this. On the show, they took several ordinary people whose credit reports were in a variety of states, and demonstrated how to go about rebuilding and improving these scores. With these sorts of techniques, potential borrowers are able to plot a course toward a strong credit rating and increased borrowing ability, just like the case studies on the show. This course begins with timely reviews of your credit report.

What Is Contained In My Credit Report?

Your credit report, with a few exceptions, details your history of borrowing and repaying money and gives a lending institution a picture of the level of risk they will face if they extend you a loan for a car, house, or even issue you a credit card. Information on reviewing your credit report will include:

  • Dates and amounts of previous loans
  • Repayment terms and amounts
  • Records of late payments
  • Number of credit inquiries
  • Judgements
Some of the institutions you have done business with may not report the data surrounding your business dealings with them, and this is the exception which will cause information to not appear on your report. You have a fiduciary duty to yourself to know what is in your credit report before you apply for loans, and therefore should review your credit report. Martin Lewis recommends doing this by signing up to a free 30 day trial of a credit rating service such as Experian's, which you can find here.

Reviewing Your Credit Report for Personal Financial Planning

When setting financial goals that may involve borrowing money, you must pay close attention to your credit standing. Purchasing a car or house, attending post-graduate school, or opening a business are all situations that may require you to obtain a loan. Getting a copy of your credit report in the beginning of the planning process will help you to outline the steps you need to perform to put yourself in a good position to borrow money if and when the need arises. If you do not include maintaining or improving creditworthiness in your plans for the future, derogatory information from up to six years ago can creep up to foil all of your plans at the last moment.

Knowing how well or poorly rated you are as a borrower is the first step to financial independence. Whether or not you intend to borrow money, if you should ever have to seek a loan for any reason, you want to be assured that your credit profile will be attractive enough to lenders to get you approved. Having realistic knowledge of the nature of your financial position is the primary reason you should always review and monitor your credit report.

Written by:

Scott Bryan, formerly a high street bank manager for over thirty years, he now works as a freelance financial writer when not consulting.

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