Mellody Hobson talks to listeners about cleaning up their finances on this week’s “Money Mondays.”
It’s time for some financial Spring cleaning?
That’s right. And I’m not talking about dusting your keyboard. Take a break from clearing the gutters and attacking all those bathroom nooks and crannies with a toothbrush and some bleach—It’s time to do some Spring cleaning of your finances.
Why is it so important?
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A nationwide study conducted by LearnVest and Chase Blueprint found that about 50% of adults worry about money and 40% feel they lack control of their finances. That’s a lot of stress—and everyone is in a position to make it better. Taking stock of your finances is like purging your closet: An afternoon of hard work pays off. At the very least, it will help you get a handle on where you stand financially, giving you a better sense of control and a clearer vision about changes you need to make to reach your financial goals.
How do we go about doing it?
I suggest this five-step plan.
Step One: Check Your Credit
A Federal Trade Commission study of the U.S. credit reporting industry found that five percent of consumers had errors on one of their three major credit reports that could lead to them paying more for things like auto loans and insurance. Five percent doesn’t sound like much, but some studies quote as many as 70% of credit reports contain errors. It comes down to how you define “error.” Some things, like an incorrect address, will have no bearing on your score. Other things, like missed payments that never happened, could cause major trouble.
What kind of trouble? Higher interest rates and disqualification on loans and apartments, not to mention higher insurance premiums and in rare cases, even being disqualified for jobs.
This is why it’s so important to request a copy of your credit report from each of the 3 bureaus (Equifax, TransUnion, and Experian) on annualcreditreport.com. That is the only official site, so don’t fall for an impostor. If you’ve been denied credit, you can also get a free copy of your report from the bureau used by the lender who denied you. Should you find any errors on your reports, get to correcting them.