Why You Should Follow Your Credit Score
Your credit score is a crucial number that affects your life now and in the future, in numerous ways. It’s so important to review your credit report at least twice a year to ensure your credit score is in good shape when you are ready to apply for new credit and allow you to monitor your progress if you are improving from past credit problems, as well as monitoring any possible fraudulent activity.
Your credit report includes information on where you live, how you pay your bills, whether you’ve been sued or have filed for bankruptcy.
Credit bureaus sell the information in your report to creditors, insurers, employers, and other businesses. The reason monitoring your credit score is important is because it will be used it to evaluate and rate your applications for credit, insurance, employment, or renting a home.
You should review your credit report just as if you do your bank statements and credit card bills. Managing credit, keeping track of spending, and putting aside savings are all key to being financially successful.
Common credit score questions:
How is my credit score calculated?
There are five types of information used to calculate a FICO score. Understanding the components that makeup credit scores can help you wisely manage your credit decisions. Your payment history makes up 35% of your score, while your overall debt level represents 30%; you should keep your credit card utilization at 30% or less. The length of your credit history contributes 15%, and the types of credit accounts you maintain consist of 10%. Finally, new credit accounts are responsible for 10%. All of these principles are then broken down into a credit score, which ranges between 300 and 850.
What affects my credit score the most?
Your payment history is the most important aspect of your credit score because it shows how you’ve managed your finances, including any late payments. Severe payment problems, like charge-offs, collections, bankruptcy, repossession, tax liens or foreclosure can destroy your credit score, making it almost impossible to get approved for anything that requires good credit. It is so essential to make your payments on time each month.
Does it hurt my credit score to pull my report?
There are two types of inquiries; a hard and a soft inquiry. A hard inquiry, also known as a hard pull, is a type of credit check done to determine an applicant's creditworthiness. Hard inquiries impact your credit score; however, the effect is minimal and short term. A soft inquiry, also called a soft pull, can occur when an individual checks his or her own credit report, when you give a potential employer permission to check your credit, when financial institutions you already do business with check your credit and when credit card companies that want to send you pre-approved offers check your credit.
Where can I review my credit report?
The Fair Credit Reporting Act requires each of the nationwide credit reporting companies — Equifax, Experian, and TransUnion to provide you with a free copy of your credit report, at your request, once every 12 months. These credit bureaus have set up a central website where you can obtain your free annual report at www.annualcreditreport.com.
If you have questions about items on your credit report or would like to learn how paying off your debt can improve your score, call us at 800-994-3328 or contact us here.