Are You Paying More Than You Should Because Of Errors On Your Credit Report?

Someone with a low credit score will pay more interest on a loan than somebody with a good credit score, and that’s reasonable and fair because the person with the low rating is more likely to default on the loan and vice versa.

The difference in the cost of a loan would most likely be much more than you’d imagine, and to give you a quick example let’s imagine two people taking out a 30 year mortgage of $180,000.

If the person with the higher credit rating paid six percent then his monthly payments would be $1,079.19 and he’d pay $208,509 in interest over the life of the loan.

If the person with the lower credit rating paid eight percent then his monthly payments would be $1,320.78 and he’d pay $295,479 in interest over the life of the loan.

The difference between $295,479 and $208,509 is $86,970 and that’s an enormous amount of money. What’s more, the difference in the interest rate was only two percent, and the person that had the lower credit score paid an additional $241.59 every month, and that’s money that he could have been getting interest on.

So Let’s Improve Your Credit Score

If you don’t have a copy of your credit report then they’re easy and inexpensive to get from the websites of any of the three major credit bureaus (Equifax, Experian, and Trans Union), and I’d recommend getting a triple credit report because you’ll need to check all three bureaus and the triple report is much easier to read.

Expect To Find Errors

Around 79% of credit reports contain errors, and studies show that around 25% percent of credit reports contain errors that are serious enough to cause automatic denial of credit, unfavorable loan rates, and in some cases even a job.

A recent study showed that;

Fifty four percent of credit reports have outdated and misspelled information, and even show loans belonging to other people.

Thirty percent list open lines of credit that were closed by the consumer.

Twenty two percent had the same mortgage listed twice.

What To Do Next

1) Check each credit report and make a list of the errors that you find and submit them in writing to the agency that’s listing them along with any documentation that you might have and request a corrected report and I’d recommend using either registered or recorded delivery.

The bureaus typically have a 30 day period in which to respond, although certain states, Massachusetts, Colorado, Connecticut, Maine, and Louisiana have shorter and longer periods allowed.

2. Try to get and keep your accounts current, and attempt to reduce your credit card balances until your credit line utilization is less than 25%.

3. Don’t open, or apply for any new credit.

4. Don’t close unused accounts unless they have very high annual renewal fees. The reason is that when you close a card you reduce your overall available credit line, which in turn increases your credit line utilization.

Six Months Later

Just getting all the errors remove will probably cause a huge improvement to your credit score, and if you follow the above advice to the best of your ability for a minimum of six months, you’ll be ready to reap a rich harvest.

1) Contact every one of your creditors and ask them to check your credit rating, and ask to pay a lower rate of interest. Almost every company is likely to oblige in some way, and you’ll have more money to start reducing your debt.

2) If your credit score has improved significantly and you have a mortgage, check to see how much you can save by refinancing it.

3) Once you’ve completed the above two things, see if you can save money on your credit cards by moving balances to new credit cards that offer much lower interest rates.

Doing this will lower your credit rating a little, but you’ll save a lot of money, and you will have achieved what you wanted to do.