While there is no definite time to check your credit score, it is imperative to do it often. Checking your credit score will help you stay financially healthy and avoid problems in the future. Try to check your credit score at least once a year or whenever necessary. But it doesn’t mean you check it every day unless you’re monitoring anything suspicious on your credit or unless you plan to make a significant financial decision.
What are the Reasons to Keep Checking My Credit Score?
Here are the key reasons to check your credit score regularly:
Understand Your Financial Health
When you check your score, you will know where you stand financially. For instance, if you have outstanding debt, you will begin to find ways to clear it to maintain a good score. Checking your score will help determine if you’re on the safe side or not.
Improve Your Credit Score
You should never be worried or afraid of checking your score, even if you think you have a poor score. If you check it often, you will learn why you have a poor score and devise ways to build and maintain it. It gives you control over your score and helps you stay on top of the game. The good news is that you can build your score using multiple strategies.
Determine Whether Your Information is Accurate
It is imperative to have accurate information on your score. But this may not happen if you do not check your score often. Checking will help you ensure that the information therein is accurate. If you identify errors, you can correct them immediately by raising a dispute with the relevant authorities.
Where do I Check My Credit Score?
Several authorized sources such as Equifax, Experian, and TransUnion can issue you a credit report. Check it out at annualcreditreport.com or call 1-877-322-8228 toll-free. You can also get a credit monitoring service from your bank for free updates on your credit score. Ask your bank or credit card issuer if they have this kind of service.
In cases where you are denied credit, you have an inaccurate report, you are unemployed, or on welfare, you have the right to see your credit report within 60 days.
To be on the safe side and ensure you have the correct information, you can request a credit report from the three agencies and compare the reports if they match. If there is inconsistency or inaccurate information in the reports, request a dispute form within 30 days.
Under What Circumstances Should I Check My Credit Report?
The following situations are clear-cut signs indicating you should check your credit report:
When you Suspect Identity Theft
If you suspect you’ve been a victim of identity theft or received notifications indicating unusual activity on your accounts, it’s crucial to check your credit report. Identity theft can lead to unauthorized accounts, fraudulent charges, and damage to your credit score. Here’s when you should consider checking your credit report:
- Unauthorized Accounts. If you see unfamiliar accounts on your credit report, it could be a sign of identity theft. Review your report for any accounts you didn’t open or authorize. Contact the credit bureaus and the respective creditors immediately to report the fraudulent activity and start the process of resolving the issue.
- Inaccurate Information. Identity theft might result in inaccurate personal information on your credit report, such as addresses you’ve never lived at or employers you’ve never worked for. These discrepancies can be indicators of fraudulent activity and should be addressed promptly.
When You Plan to Apply for a Mortgage
Some lenders request a credit score before approving a mortgage. Without a credit score, you may not get the loan or get lower than you expected. Reviewing your credit score will help you determine how much loan you can get from the lender, and you can also correct potential errors that can hinder you from getting the loan.
Reviewing your credit report before applying for a significant loan, you can address any potential issues affecting your loan approval or the terms you’re offered. Correcting errors, paying off outstanding debts, and improving your credit score can enhance your chances of getting favorable loan terms.
When Seeking a New Job
Most organizations conduct a thorough background check before employing candidates. This is for the benefit of protecting the organization, its customers, and employees. As a result, an organization will review your credit score to determine whether you have a clean record. Your potential employer will need your permission before reviewing your score.
Some employers conduct credit checks as part of their hiring process, especially for positions that involve financial responsibilities or access to sensitive information. Review your credit report to ensure the information is accurate and to be prepared for any questions that might arise during the application process.
Recently Divorced
Going through a divorce can have implications for your financial situation. It’s important to check your credit report after a divorce to ensure that all joint accounts have been properly addressed and that your credit is not negatively affected by any decisions made during the divorce process. Here’s when you should consider checking your credit report:
- Joint Accounts. If you had joint credit accounts with your former spouse, these accounts might still show up on your credit report. Even if you agree that your ex-spouse would be responsible for certain debts, any missed payments or defaults on these joint accounts can also affect your credit. Check to make sure these joint accounts are being managed appropriately.
- Account Changes. Ensure that your credit report accurately reflects any accounts that were closed or transferred to your name only as part of the divorce settlement. This helps prevent any confusion or potential credit issues in the future.
Creditor Agreement
When you agree with a creditor, whether it’s to settle a debt, modify repayment terms, or establish a payment plan, it’s important to monitor your credit report to ensure that the terms of the agreement are being accurately reported. Here’s when you should check your credit report:
- Debt Settlement. If you’ve negotiated a debt settlement with a creditor, it’s crucial to verify that the settled amount is accurately reported on your credit report. The creditor should update the account status to reflect that the debt has been settled, which can impact your credit score.
- Modified Payment Terms. If you’ve worked out modified payment terms with a creditor, such as reduced interest rates or lower monthly payments, ensure that these changes are accurately reflected on your credit report. This helps demonstrate that you meet your obligations per the new agreement.
- Payment Plans. If you’ve established a payment plan with a creditor to repay a debt over time, regularly checking your credit report can confirm that you are making payments as agreed. This consistent payment history can positively impact your credit score over time.
What’s Included in a Credit Report?
A credit report is a detailed record of your credit history and financial behavior compiled by credit reporting agencies (credit bureaus). It provides a snapshot of your creditworthiness and is used by lenders, creditors, employers, and other entities to assess your financial responsibility. The main components included in a credit report are as follows:
Personal Information
This section includes your identifying information, including your full name, current and previous addresses, date of birth, and Social Security number. It’s essential to ensure this information is accurate, as discrepancies could affect your credit report’s accuracy.
Accounts
The accounts section lists all of your credit and loan accounts. This includes credit cards, mortgages, auto loans, student loans, personal loans, and other credit lines. Each account entry provides details like the creditor’s name, account number, type of account, and date the account was opened.
Account Balances and Limits
For each account, your credit report will display the outstanding balance, credit limit (for credit cards), and the highest balance you’ve had. The balance-to-limit ratio, or credit utilization, is important for determining your credit score.
Payment History
This section outlines your payment behavior on each account. It shows whether you’ve made late payments on time, missed, or had late payments. A consistent history of on-time payments positively impacts your credit score. In contrast, late or missed payments can have a negative effect.
Public Records
Public records include any legal actions that pertain to your finances, such as bankruptcies, tax liens, and civil judgments. These entries can significantly impact your creditworthiness and stay on your credit report for several years.
Credit Inquiries
This section lists the inquiries made to your credit report. There are two types of inquiries: “hard” inquiries, which occur when you apply for credit, and “soft” inquiries, which occur when companies review your credit for purposes like pre-approval offers. Hard inquiries can slightly affect your credit score, especially if there are multiple inquiries in a short period.
Collections and Negative Items
Collections, charge-offs, and other negative items are reported if you’ve failed to make payments on an account and it’s been handed over to a collection agency. These entries can significantly impact your credit score and may stay on your report for several years.
Credit Score
While not always included in a basic credit report, some reports provide your credit score. This numerical representation, usually based on a scoring model like FICO or Vantage Score, helps lenders quickly assess your creditworthiness.
Key Things to Keep in Mind Regarding Your Credit Report
Here are seven important things to keep in mind regarding your credit report:
Your Accounts
Your credit report will list all your credit accounts, such as credit cards, loans, mortgages, and lines of credit. Each account will include information about the creditor, account type, account number, and when it was opened. This section helps lenders assess your creditworthiness by showing your borrowing history.
Account Balances
The credit report will display the balances on your credit accounts, indicating how much you owe to each creditor. High balances relative to your credit limits can negatively affect your credit score. Aim to keep your credit card balances low to demonstrate responsible credit utilization.
Payment History
This section reflects your track record of making on-time payments. Late payments, missed payments, and accounts in default can significantly lower your credit score. Consistently paying your bills on time demonstrates financial responsibility and positively influences your creditworthiness.
Inquiries
Credit inquiries are records of when lenders or creditors have accessed your credit report in response to a credit application. There are two types of inquiries: “hard” inquiries when you apply for credit and “soft” inquiries when a lender checks your credit for purposes like pre-approval offers. Too many hard inquiries within a short time can temporarily lower your credit score.
Credit Utilization
This is the ratio of your credit card balances to your credit limits. High utilization suggests a greater risk of overextending yourself financially. Keeping your credit utilization below 30% is generally advisable to maintain a healthy credit score.
Length of Credit History
The age of your credit accounts matters. A longer credit history can positively impact your credit score by showing your ability to manage credit over time. Closing older accounts might shorten your credit history and potentially lower your score.
Negative Information
Negative information, such as bankruptcies, foreclosures, and collections, can stay on your credit report for several years and significantly impact your creditworthiness. However, their impact diminishes over time as you build a positive credit history through responsible financial behavior.
Keep Monitoring Your Credit Score
Sometimes, you may fail to check your credit score, assuming everything is okay. But things may not be okay, and you will not know unless you check your score. This is why you should sign up for a free alert to stay updated with your score. Contact us today for more information about credit scores.
