Why does my credit report and credit score matter?

There are three primary reasons why your credit report and score can have a huge impact on your life. First, companies use it to decide whether or not they want to lend you money to buy a house or car, give you a credit card, lease you an apartment, give you a cell phone plan, give you cable without having to prepay, and countless other important decisions that have a huge impact on your quality of life. If you have a solid credit history as indicated by your credit report and credit score, chances are companies will be willing to work with you on all these services. If you do not, chances are you will have a hard time getting even the most basic services without having to pay for them in advance.

Second, companies use your credit report to decide the interest rates that they charge you on loans, on credit cards and on any other type of loan or credit you get. This means that having negative information on your credit report can literally cost you thousands of dollars a year. Lenders and creditors typically use a credit score to make these decisions, which is calculated from information on your credit report. Let's use an example. Say you are buying a house and want to get a $216,000 mortgage. If your credit score is over 760 (indicating excellent credit), your interest rate based on current rates would be around 5.86%, which on a 30-year fixed-rate mortgage would give you a monthly payment of $1,276. On the other hand, if your credit score was 630 (not very good but good enough to get a mortgage), your interest rate would be around 7.45%, giving you a monthly payment of $1,503. That's a difference of $227 per month, $2,724 per year and $81,720 over the life of the mortgage. Clearly, these are significant numbers. Of course, if your credit score was below 600, you would probably not be able to get a mortgage at all.

The third reason you need to know what's on your credit report is identity theft. Identity theft is one of the most common crimes today. In addition to monetary loss, victims of identity theft also suffer by having their credit histories decimated, leaving them with very low credit scores, unable to be offered any credit and even having current credit revoked. This can take months or years to fix and may never be entirely resolved. The first sign of identity theft is usually a change to your credit report, often a credit inquiry prompted by the thief trying to open an account in your name. If you subscribe to a credit monitoring service, you will be notified of any change to your credit report within 24 hours of the change and should be able to catch any suspicious activity before it results in fraudulent activity in your name.

Return to credit report monitoring FAQ

Search our blog archives and frequently asked questions for more information about Credit Report Monitoring Services

Recently answered questions about Credit Report Monitoring Services:

Credit Report Statue of Limitations
The following is an actual reader submitted question: Q: How long does debt stay on your credit report? A: According to the FTC's Fair Credit Reporting act, most negative credit information will stay on your credit report for 7.5 years (7 years + 180 days) from the date of delinquency. It can be a bit confusing, but [...]

Does Credit Report Monitoring include more than one credit card?
The following is an actual reader submitted question: Q: Does Credit Report Monitoring include more than one credit card? A. Yes, it does. Credit Report Monitoring keeps tabs on any changes to your personal credit report. Your credit report covers your entire credit history, which includes all credit cards, loans and any type of credit account you [...]

How a landlord can run a tenant credit report
The following post in our Reader Question series is an actual user submitted question: Q: What is the best way to do a credit check on a prospective tenant? A: Every experienced landlord or property manager knows that it makes good financial sense to run a credit report on prospective tenants. This simple step can save you [...]

Can I get a Free Credit Report without a credit card?
The following post in our Reader Question series is an actual user submitted question: Q: I don't have a credit or debit card. How can I still get a free credit report? A: Contrary to popular opinion, you don't need a credit or debit card to get a free credit report. In fact, [...]

Does the Equifax w/Score Power offer need a promo code?
The following post in our Reader Question series is an actual user submitted question. Q: I tried to sign up for your 3-in-1 credit monitoring with FICO score, $14.95 per month, but the application asked for a promotion code, but in all the information describing the promotion, there was no promotion code that I could find. A: [...]

Which factors impact your credit score the most?
The following post in our Reader Question series is an actual user submitted question. Q: When looking at your credit report, is there a way of prioritizing which areas to work on? E.g., if you have credit card debt, are working on paying an offer and compromise with the government, is there a reference to how [...]

What if a teenager loses his wallet?
The following post in our Reader Question series is an actual user submitted question. Q: If someone who has just turned 18 and has no prior credit history loses his wallet, what can he do to prevent someone using his driver's license to open up new accounts in his name? Would it do him any good [...]

Will a reduced credit card limit hurt my credit score?
The following post in our Reader Question series is an actual user submitted question. To maintain the integrity of the original question, we do not edit or change reader questions in any way. Q: My bank is lowering my credit card limit, even though I always pay on time. Will this hurt my credit score? A: Unfortunately, [...]

Why do I have different credit scores from TrueCredit and Experian?
The following post in our Reader Question series is an actual user submitted question. To maintain the integrity of the original question, we do not edit or change reader questions in any way. Q: I have a 3 score report from True Credit and one from Experian. They have totally different scores. Why would this be? [...]

Reader Questions: Is there a free on line credit report service that has no ...
The following post in our Reader Question series is an actual user submitted question. To maintain the integrity of the original question, we do not edit or change reader questions in any way. Q: Is there a free on line credit report service that has no trial or any other hidden fees? A: Thanks to [...]