As I was checking Google for credit related news this week, something that I do quite often as the admitted credit geek that I am, I came across an article about a new study that really bothered me. The study I am referring to was recently conducted by Bankrate and, among other things, it estimates that around 35% of US consumers have never reviewed their credit reports and over 26% of consumers have never even checked one of their credit scores.
As a credit expert I am constantly approached by consumers who are extremely concerned about their credit and want to learn more about how to improve their credit reports and scores to the highest level possible. So, I found it pretty disturbing that over 1/4 of consumers simply seem not to care about their credit at all.
Although disturbed by the study, I was not surprised by the fact that a large portion of US consumers are unconcerned about their credit reports and scores. After all, thanks to the Fair and Accurate Transactions Act (FACTA) passed in 2003, consumers have had the right to pull copies of all 3 of their credit reports for free annually via AnnualCreditReport.com. Yet only a mere 4% of these free reports are claimed on an annual basis.
There are many different reasons why consumers ignore their credit reports and scores. However, regardless of the reason ignoring your credit is a recipe for disaster - especially with the modern prevalence of data breaches. Here are 3 of the top reasons why consumers do not care about their credit as much as they should.
1. Failure to Understand the Responsibility
Of course you have the right to expect accurate and error-free credit reports. It is a right that is afforded to you under the Fair Credit Reporting Act (FCRA). Yet even though you have the right to expect accurate credit reports the fact of the matter is that errors and fraud occur on credit reports every single day. Mistakes on credit reports are quite common. In fact, the Federal Trade Commission released a study in 2013 which estimated there to be around 40 million mistakes on consumer credit reports. This means 1 in 5 consumers are victims of credit report errors.
While you do have the right to expect accurate credit, it is 100% up to YOU to monitor your credit reports for mistakes. When and if a mistake does arise then you have the right to dispute the mistake with the credit reporting agencies or even with the creditor or collection agency directly. However, if you are not in the habit of checking your credit reports routinely then you will never know when an problem occurs.
2. Bad Advice
The cash-and-carry crowd has many consumers convinced, especially young consumers, that living a life free from the shackles of credit is the only logical choice to make. However, the belief that credit scores, credit cards, loans, and mortgages are all part of an evil system designed to ensnare the unsuspecting masses is completely false.
Even if you decide to avoid credit cards, rent your home, and pay cash for vehicles it is still impossible to live a life which is unaffected by your credit reports and scores (unless you plan on going completely off the grid and living in a shack in the woods). Like it or not, your credit reports and scores impact many areas of your life including your insurance premiums, utility deposits, your ability to rent an apartment, your ability to rent a car, and even your ability to land a job. The sooner you admit to yourself how much your credit really matters the better off you will be. CLICK HERE to read "Why Credit Avoidance Is a Bad Strategy."
3. Mistaken Beliefs
Many people mistakenly believe the their credit only matters when they apply for a loan. However, only checking your credit reports and scores during a loan application is a giant mistake. First, if credit issues do arise during a loan application it is important to understand that it can often take months of hard work to resolve credit problems on your own or even with professional assistance. Second, only viewing your credit reports during a loan application is dangerous because it increases the probability of fraudulent accounts appearing on your credit reports without your knowledge.
How to Monitor Your Credit
Thankfully, monitoring your credit is not very difficult. You have the right to access a free credit report from each of the 3 credit bureaus individually annually via the website AnnualCreditReport.com. There are also many websites where you can access completely free credit scores (generally from one credit bureau at a time). CLICK HERE for a list of free credit score websites. Finally, you can sign up for an inexpensive, 3-bureau credit monitoring service to make the process of keeping tabs on your credit reports and scores consistently a breeze. CLICK HERE for a list of reputable, 3-bureau credit monitoring services.
Michelle Black is leading credit expert with over 13 years of experience, the credit blogger at HOPE4USA.com, a recognized credit expert on talk shows and podcasts nationwide, a contributor to the Wealth Section of Fort Mill Magazine, and a regularly featured speaker at seminars up and down the East Coast. She is an expert on improving credit scores, budgeting, and identity theft. You can connect with Michelle on the HOPE Facebook page by clicking here.