Little-Known Ways Your Credit Impacts You
Most people know that a poor credit score can impact your ability to get a mortgage, car, and credit cards. But did you know that your credit history has a much wider-ranging impact on you, far beyond your ability to obtain credit or loans?
“A lot of things are based on trust and your credit report, to some degree, talks about how trustworthy you are,” says Eric Simons, a certified financial planner and head of Simons Financial Network in New York.
According to Simons and other experts, your credit history can also be legally considered if you’re applying for automobile, medical or life insurance, are trying to rent a new apartment, or are seeking a new job or even a promotion at your existing place of employment.
Say you are up for a better-paying position at your company, one that would require you to manage a budget or deal with customer funds. Under the law, your bosses are entitled to check out your credit history as part of their evaluation of you – as long as they do it in accordance with the Fair Credit Reporting Act.
What this means is that they must first get your permission to check your credit. They must also inform you of your rights under the law. These rights include the right to dispute the accuracy or completeness of any information supplied by a credit reporting agency, and the right to a free consumer report upon request within 60 days. Also, if any of the information your employer obtains causes them to deny you a promotion or act “adversely” toward you, they must notify you in writing of which credit reporting agency they used.
The same notification requirements hold true for any insurance company that decides to terminate your policy, deny you insurance, or increase your rates, if such adverse action in taken based solely or partially on information in your consumer report.
Check out a couple of news items recently about the links between insurance and credit:
- In Alaska: lawmakers considered legislation that would halt credit scoring after receiving complaints that bad drivers with good credit paid lower car insurance rates than others who had good driving records but poor credit. In the end, however, no such ban occurred.
- In Washington: authorities have started limiting the extent to which insurance companies can use people’s credit histories to determine whether to issue new policies, and renew or cancel existing ones
The “Big Three” Credit Bureaus
Image by Casey Serin via Flickr
You are entitled to receive one free credit report every 12 months from each of the national consumer credit reporting companies: TransUnion, Equifax and Experian. Some people like to order one report, wait six months, then order another credit report from a different bureau, then wait another six months, and order a third report form the last credit reporting company. This way, they can monitor their credit report throughout the year – free of charge. The downside to this approach, however, is that you never see all your credit reports simultaneously to get one complete snapshot in time of your credit files. This is important because different credit bureaus often have varying information. You want the information in all three credit files to be as accurate, complete and consistent as possible. And the best way to do that is to see all three reports at the same time. So I suggest that when you get your credit reports, request all three free reports at the same time, and compare them side by side. With each credit bureau, after you get your free report, you can’t get another free one from that bureau for 12 months. If you want to see your credit file again before one year’s time, you’ll have to pay for the report.
There are a few other ways, though, that you can get free credit reports. If you ever get turned down for credit, you are automatically entitled to a free credit report under the Equal Credit Opportunity Act. Just make your request to the credit bureaus within 60 days of being denied credit. Additionally, if you are unemployed, very poor (or considered “indigent”), or have been the victim of identity theft, you are legally entitled to a free credit report under federal law.
Next – Day 4: Order Your FICO® Score (Part 4)
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