Call it credit phobia.
About 14 percent of adults don't check their credit reports due to fear of what they'll find, according to a recent online survey of more than 500 consumers by WalletHub. Younger consumers are more likely to harbor that aversion, as are women.
"It can be fear of the unknown," said Jill Gonzalez, an analyst with WalletHub. "Or it could be because it will reinforce what you already know — that you already are in a lot of debt or delinquent on accounts. That's a pretty common reason."
Yet avoiding looking at your credit report — which generally includes information on current and past debts — comes with a major risk: If there are errors on it, your credit score might be lower than it should be. And that means when you go to apply for your next loan or credit card, you could pay more in interest than you would without the mistake.
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"When your score is mistakenly lower, it means you're not getting the best deals," Gonzalez said.
Generally speaking, the higher your credit score, the lower the interest rate you can qualify for on a variety of consumer debt, including mortgages, auto loans and credit cards. Credit scores fall on a range of about 300 to 850, with scores above 700 considered good or excellent.
Someone with a fair credit score that falls between 580 and 669 will pay about $45,000 more in interest over their lifetime on loans and credit cards versus a consumer with very good credit score of 740 or higher, according to recent research from LendingTree.
Regardless of where your score falls, spotting a mistake on your credit report could boost your number fairly quickly. About 20 percent of reports have an error on them, according to data from the Federal Trade Commission.
Inaccurate information can arise from errors in information supplied by a creditor or from a mistake made by a credit-reporting firm, or from fraud — i.e., someone uses your personal data to open a credit card account.
Additionally, knowing what's on your report and understanding how it impacts your credit score gives you the power to improve your number.
For instance, about a third of your score is based on how well you stay on top of your bills. Lenders like borrowers who have a good track record of paying on time.
"For people living paycheck to paycheck, that can be easier said than done," Gonzalez said. "If you're not, though, you can automate your payments. That saves you from paying late."
Another third or so of your score is derived from your credit utilization. That is, the percentage of your available credit that you're actively using. The lower that share, the better.
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"Anything over 40 percent is going to negatively impact your score," Gonzalez said.
Also important is how many years you already have been borrowing and repaying money. So if you're just starting out and need to build credit, you can see if someone in your life (i.e., Mom or Dad) will allow you to be listed as an authorized user on one of their credit card accounts.
Your credit also matters for reasons that go beyond interest rates: Some landlords and employers will check the credit reports of potential tenants or employees.
"If they're checking, and you have good credit and another person has bad credit, you're probably going to get that apartment or job over the other person," Gonzalez said.
You should check your credit report at least once a year, if not more, she said.
And no, checking will not hurt your score.
