Checking your credit report is probably the most underrated financial move you can do. There are several steps you can take to improve your credit score, and they all involve understanding how it’s calculated and how you can affect it. If you’ve never focused on your finances but are ready to start, there’s no better time than now. Here’s why making it a habit to check your credit report at the beginning of every year can have a massive impact on your financial future.
Why should I check my credit report?
Your credit report holds the key to your financial future even if you don’t have a credit card. Your credit report keeps an up-to-date record of how you spend money and the way you treat debt. The majority of your financial history will be on your report at some point, including car leases, student loans, mortgages, and, yes, your credit cards, too.
When you’re ready to get financing for a major purchase, the lender will pull your credit report will to verify your eligibility. If you apply for a job in the finance industry or want to seek high-level security clearances for government jobs or contracts, you should also expect your credit report to be pulled. Employers in the financial sector and government agencies pull your report to ensure that you’re not in serious debt, which could (in their eyes, at least) make you desperate and open to bribes.
If you’ve reviewed your credit report and didn’t like what you saw, there are a few things you can do.
Your debt is higher than you thought
If your credit card debt is causing a bigger dent in your credit score than you expected, you need to take control and reduce that debt as quickly as possible. Try using this credit card snowball calculator for determining the severity of your situation. The calculator can also help you create an actionable plan for getting out of debt forever.
There’s an error on your credit history
If there’s anything that’s incorrect on your credit history, contact the three major credit reporting bureaus to file a dispute. Keep in mind that each agency has its own reporting methods, so seeing a mistake on your TransUnion report doesn’t mean Experian or Equifax will have it, too.
The importance of checking your credit report at the beginning of every year
Hopefully, you’re now convinced why it’s useful to keep an eye on your credit report. But why is it so critical to check your report in January?
It helps you set financial goals for the year
If you’re one to make resolutions every year, there’s likely been at least one year where you’ve wanted to make a change in your finances. If you think that 2022 will be the year your finances will improve, you first need to know your current financial situation.
Pulling your credit report in January will help you create actionable goals that ensure you reach your New Year’s resolution easily. In addition, you should use your credit report to adjust your yearly budget if there are any outstanding loans or credit card debts you need to pay off.
It ensures you’ll be able to reach your goals
If you plan to get married, have a baby, or buy a home in the next year, reviewing your credit report will ensure you’re not hit with any unexpected issues, i.e., loan denials or higher interest rates. The better your score, the more competitive interest rates you’ll get. Pull your report every January and verify there aren’t any errors or things that need to be disputed.
The bottom line
Checking your credit regularly is essential and provides the basis for proper long-term financial planning. Make it a habit to check your credit report at the beginning of every year to set yourself up for financial success.