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On High Credit Alert

Most people go on High Credit Report Alert before a big financial event such as buying a house, applying for a home equity loan, leasing a car, or getting a new credit card. For the rest of us, an occasional look into the official credit record has always been sufficient.

That might not be enough anymore. If you've watched the news lately, you might have noticed that a lot of well-known companies -- H&R Block (NYSE: HRB  ) , ChoicePoint (NYSE: CPS  ) , Marriott (NYSE: MAR  ) , and even BJ's Wholesale Club (NYSE: BJ  ) -- have let our top-secret financial information flap around in the wind, seemingly unguarded.

But fear of identity theft isn't the only reason to check your credit. You want to look good (no spinach between the bicuspids) for anyone who might be checking you out. That includes your banker, your broker, your insurance agent, and even your employer.

Do you recognize yourself in any of the following scenarios? It might be time to check your credit if you do:

I use a credit card. We all know that it's a straight line from our credit score to the credit card interest rate we qualify for. And if you're among the 40% of cardholders who pay your balance in full each month, you needn't fret too much whether your card has a 2.9% APR or a 24.9% APR. However, you might not know that your banker is keeping very close tabs on even the most responsible customers like you. While they're thrilled that you're paying their bills on time, they want to know how you're conducting yourself with their competition.

Lenders are increasingly instituting the "universal default" clause, which is a lawyer-ese way of saying, "If you goof up with someone else, we've got a right to punish you." Today, nearly 40% of lenders have this clause written in tiny type in that cardholder contract that most of us ignore when it falls out of our monthly statement. Guess what? It's time to read the fine print. That clause allows lenders to raise interest rates based not on your history with them, but rather on your payment history or credit activity with other companies. If you occasionally carry a balance or are even thinking of making a bigger financial move in the future, you might want to see what your credit report card says about you.

I have car insurance. Does how you handle money have an impact on your skills behind the wheel? Your car insurer thinks so. In addition to your history for fender-benders and moving violations, more and more insurers are relying on your credit score as a measure of your insurability. All of the major insurers -- including Travelers, AIG, Liberty Mutual, GEICO, and Safeco -- will check your credit history where permitted by law.

I have a job. That company credit card isn't just a free ride to shop at Staples. Be prepared to have your boss check your credit record before he or she even lets you carry one around. Should your employment circumstances change, don't be surprised when an interviewer asks you to sign a release so that he or she can access your credit file.

I own a house. Nowhere does one's credit history have a bigger impact than on the biggest purchase you'll probably ever make -- a home. Twenty points (plus or minus) on your credit score determines whether you or your mortgage lender pockets thousands of extra dollars. It's not chump change, that's for sure. You can use the Loan Savings Calculator at myFICO.com to see how different credit scores affect the interest rate you'll pay. For example, a FICO score in the range of 720 to 850 qualifies you for a 6.256% APR on a 30-year fixed mortgage. If your score is 21 points below the lowest qualifying score (699), you'll pay 6.919%. On a $300,000 mortgage, that's a difference of $132 a month. If you're in the 620-to-674 FICO range, you'll pay 8.069% -- or $2,216 a month. That's $368 more than the person with a score in the top range.

I have a roommate. OK, most of us aren't living with America's Most Wanted. But here's the tale of one guy who found out that he was, after discovering some of his discarded pre-approved credit card offers in his housemate's bedroom.

The credit report card has become ubiquitous. It's our Adult Report Card -- the place where we get a Pass/Fail based on a detailed transcript of our grown-up borrowing ways. Everyone in the country is entitled to a free credit report from the three major reporting bureaus courtesy of annualcreditreport.com (and here are all the details). Need more convincing?

  • You haven't checked your credit report in quite a while. Who knows what's accumulated on your report? And aren't you just a wee bit curious to see whether that college charge card is still considered an open account?
  • You are a tad competitive, and want to see how you compare with the card-carrying nation at large (and your coworker in the next cubicle).
  • You want to make sure that what's on your permanent record is an accurate reflection of the true you.

The Motley Fool'sdisclosure policy does not require writers to reveal their FICO scores. If you want to peek insideDayana Yochim'sportfolio, however, herprofile'ssinging like a canary.


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