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Your Financial Snapshot: The Importance of Reviewing Your Credit Report on an Annual Basis

Posted on in Arlington Heights Foreclosure Attorney

Becoming familiar with your spending habits, debt ratio, and understanding how lenders view your financial snapshot may very well be your best defense against future bankruptcy or foreclosure action. It all begins with fiscal responsibility, supported by a sound credit report, but how many Americans actually request and review their credit report on an annual basis?

Under the Fair and Accurate Credit Transaction Act (2003), all American citizens are entitled to request a free annual credit report from each of the three leading credit reporting agencies: Experian, Transunion and Equifax. Unfortunately, according to American Trust Escrow, a full-service, licensed and independently owned real estate escrow leader, only 44 million people out of approximately 200 million request and review their credit report each new calendar year.

Establishing an annual credit report review practice, especially if you are planning on purchasing a home, is essential. By doing so, you may find incorrect reporting items or come to the realization that it may not be the opportune time to begin house hunting.

It is common knowledge that a lower credit score brings higher interest rates. Accepting a high interest rate mortgage loan may later place you in danger of foreclosure or bankruptcy in the event of a medical emergency or loss of unemployment.

By annually reviewing your credit report, you will know exactly where you stand, which may derail a future frantic call to an experienced foreclosure or bankruptcy attorney.

These helpful hints can prepare you for what to expect when requesting, receiving, and reviewing your credit history.

Requesting Your Credit Report

Contact the industry leaders, Equifax, Experian and Transunion either in writing, online or by telephone to request a copy of your current credit report.

Understanding Credit Score Ratings

Once you receive your reports, you will notice ratings between 300 to 850, with 300 being the lowest score and 850 ranking as the highest.

Your credit score or FICO (formerly Fair Isaac and Company) score provides lenders with a financial snapshot of your commitment to satisfy your debt. Credit reporting scores are derived from algorithms created by the industry leaders.

Your credit score also affects the interest rate made available to you by prospective lenders. If your score falls between 680 to 700, you will be considered a relatively safe risk but any score falling below 700 you may label you as a possible credit risk.

Making the effort to review and improve your credit report may reveal that financial housekeeping may be in order. Reducing your risk to lenders will enable you to obtain a mortgage loan at a more manageable interest rate, possibly avoiding future financial issues which could lead to bankruptcy or foreclosure.

Once you have reviewed your credit report, these following tips may prove helpful when devising a plan to improve your credit score.

  • Pay all bills on time. Delinquent payments have a negative impact on your score,

  • Maintain low credit balances. High balances can also affect your score,

  • Do not opt for new credit cards; transferring balances to a new card may lower your score by up to 10 points,

  • Fiscally managing your current credit cards will increase your score,

  • Do not bank on outstanding debt magically disappearing; closed accounts and past payment history is still factored into your credit score.

First impressions are everything. If you are considering purchasing a home or another major purchase with the assistance of a lender, being prepared is your best bargaining chip. By establishing and maintaining a solid credit report, the odds are already in your favor.

The experienced legal team of Newland & Newland, LLP understand the importance of a healthy credit report but we also understand how finances can go awry rendering you vulnerable and possibly facing bankruptcy or foreclosure. Our knowledgeable Arlington Heights bankruptcy and foreclosure attorneys are available to assess your situation and assist with rebuilding your financial snapshot. If you reside in the Chicagoland area including Cook, Lake, DuPage, McHenry, Kane and Will County areas, contact our offices today for your free phone consultation.

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