Your Credit Report: The Reasons You Need To Check It Regularly
Credit is an integral part of your financial picture. The saying may be “cash is king”, but if your credit is bad or nonexistent, it can make your life incredibly difficult. You’ll likely find that you can’t get a loan, including for a car or a home. Credit cards will have outrageous interest rates and fees associated with them if you can get them at all. It can even cause you to not be able to rent a home or apartment. It’s vital that you check your credit and make sure it’s in good shape.
What your credit score means
Think of your score as being like a report card you got in school: just like your letter grades indicated how well you were progressing with your learning, your score indicates how responsible you are with credit.
A higher score indicates that you pay your bills in full and on time, while a lower score indicates that you either don’t always pay your bills or that you often pay them late. The good news is there’s no history of them, like there is with report cards from school. When a lender pulls your score to decide whether to give you a loan or credit card, they only see the score at that moment in time.
There are a number of factors that impact your score, such as:
- Payment history
- Credit utilization rate
- Total debt
- Public records indicating things like bankruptcy
- Type, age, and number of credit accounts
- How many new accounts you’ve recently opened
- Number of inquires on your report
These things all combine to come up with your score.
Scores generally range between 300-850. A score above 700 is considered to be good, with anything above 800 being exceptional. Bad or poor scores tend to be under 600.
The impact of your credit score
Your score has a huge impact on your financial life. From loans to credit cards to renting homes and opening bank accounts, that three digit number can make or break you. Depending on how high or low your score is, the following things could all happen:
- No or poor score can mean you’re denied for loans and credit cards
- Poor scores can lead to higher interest rates on loans and credit cards
- High scores can net you much lower interest rates on loans and credit cards
- Landlords can decide that renting to you would be a bad idea if you have a poor score
- A poor score could cause a bank to deny you the ability to open a checking or savings account with them
Where to get your credit report
Getting your credit report is easy. You can get it from any of the three credit reporting agencies for free once a year. You can also get it through a number of websites that will also help monitor your credit score, though you must use caution with those.
Fixing bad credit
Fixing bad credit is not a quick fix. You can start by:
- Disputing any errors in your report
- Set up payment reminders to ensure you pay your bills on time
- Reduce the amount of debt you owe
- Don’t open new credit cards just to increase the amount of credit you have
- Don’t close a bunch of unused accounts
Staying on top of your credit by checking your score and report regularly will help create a financial future that doesn’t cost you more than it needs to.