We are now at the point that we are going to be taking some important and crucial steps in repairing and cleaning up credit. This is something you can do, even if you are not out of debt. It is important to do a “self” credit check each year for many reasons:
- Know your score – knowing your credit score is a mental note and motivation for making changes and being more conscientious about your spending habits.
- Find Errors – Finding errors on credit reports is very common. According to the Federal Trade Commission – 42 million Americans have errors on their credit reports. This is a HUGE chunk of the adult population. Errors on credit reports can cause a lot of financial and job problems.
- Know where you stand – not just knowing your score, but knowing your whole credit history gives you tons of motivation, perspective and direction on your goals. Credit reports are quite amazing as they show you not only your score, your credit and debts, but your payment history for the past two year, skipped payments and much more that really helps to give you insight to your weaknesses and what you need to work on in a much more honest way.
Today, our credit reports are not scary, but many years ago – we were terrified looking at them! Maxed credit, late payments, low scores…they were just.really.bad. It did not seem like a hopeful situation at all! We were nearly as low as you could get on the scores. But in a few short years, it went the complete opposite direction without intentionally pandering to our credit, but simply trying to be good stewards of our finances and pay off our debts.
Remember, we were just a paycheck away from bankruptcy. But after immediately getting our feet on the ground, becoming serious and following our step-by-step financial plan, we quickly got out of the $100k of consumer debt we were in without bankruptcy and without a credit counselor! And every year that we checked our reports, it was a little better and a little better each time! Two years out of debt was the real turning point in our credit scores and credit history. Many items do not leave your report for 7-10 years, but having a clean record for 2 years dramatically shifted our credit in the opposite, positive direction.
Well, a few years ago after about 2 years of being debt-free, besides our mortgage, we went in to refinance our mortgage for a much lower rate and faster payoff since we were now debt-free and better credit to qualify for those benefits. Well, when the loan officer was filling out the “pre-forms” before running the credit check, she asked about debts. We didn’t have any besides our home. She really didn’t believe us as that was an anomaly to her. Filling out the paperwork was a quick process because there wasn’t anything to write down. Well, she pulled our report and said, “well, you were right! You have no debts!” Now because most items do not leave your credit report for many years, it was a long report she printed off….but $0.00 all down the line. 🙂 Needless to say, we got a great refinance loan and are even paying it faster with this trick to save $50,000 on a mortgage and much more.
Now you might not think that having a good credit score is important if your goal is to be and live debt-free. But we have dedicated an entire article on why a good credit score is still important for the debt-free.
The Task This Week
Getting back to this week’s task, it is to begin the credit clean-up steps. Step #1 is claiming your annual free credit report. It is your right and entitlement given to you by the Federal Government to know what your credit report says at least once per year without showing up on your credit as a inquiry/check. Essentially this meaning this is not the same request as a loan check, new account (like phone, cable or internet) check, or any other sort of check that dings your credit.
To Get Your Credit Score and Report
You can instead get one from the annualcreditreport.com site, but it does not include a credit score. We really want to encourage you to know your score. It is easy, free and does not affect your credit or credit score. That is why we recommend that you get one from Credit Sesame instead. This one also gives you a credit score and you can also check both as often times there are inconsistencies within each that they other may not show. This gives you a more full perspective and reporting to help you get it cleaned up and allows you to know your score, which is often what is used for jobs and services.
That’s all you need to do this week! We will use this report (for your eyes only) to assign the next tasks in the coming weeks!
Need to catch up? Come join us on this challenge from the very beginning by clicking on the 52-Week Take Back Your Finances Challenge and sign up to start receiving your automated challenge from the very beginning!
One final thing…we also have a Facebook Group where you can engage in discussions, receive encouragement and talk to others that are participating in the challenges too for more ideas! Head to the Be Intentional with The Thrifty Couple Facebook Page HERE and ask to join us there! You can also invite friends and spouses too!
Disclaimer: We are not licensed financial planners. We are only a couple that have been just a hair-breadth away from bankruptcy and found our way out of debt with a goal to now help others. Please make sure to consider any advice given on our site and in this challenge as tips we have used ourselves; they may not work for everyone. If you have questions please make sure to contact a licensed professional.