What About Your Credit Report
Though the terms credit report and credit score are often used interchangeably, theyre not synonymous. Your credit report is a detailed, written history that outlines the amount of debt you have and how well youve managed to pay it back. It serves as the basis for your credit score. And just as you check your credit score, you should also monitor your credit report.
According to the Consumer Financial Protection Bureau, you should check your credit report at least once a year to make sure there are no errors or inaccuracies that could keep you from getting credit or the best loan terms.
Mahnken suggests a way to be even more vigilant. You can get your credit reports from the three major credit bureaus once per year by going to AnnualCreditReport.com, he says. Spacing out your three reports allows you to check once every four months.
Aim For 30% Credit Utilization Or Less
refers to the portion of your credit limit that you use at any given time. After payment history, its the second most important factor in FICO Score calculations.
The simplest way to keep your credit utilization in check is to pay your credit card balances in full each month. If you cant always do that, then a good rule of thumb is to keep your total outstanding balance at 30% or less of your total credit limit. From there, you can work on whittling that down to 10% or less, which is considered ideal for raising your credit score.
Use your credit cards high balance alert feature so you can stop adding new charges if your credit utilization ratio is getting too high.
Another way to improve your credit utilization ratio: Ask for a credit limit increase. Raising your credit limit can help your credit utilization, as long as your balance doesnt increase in tandem.
Most credit card companies allow you to request a credit limit increase online youll just need to update your annual household income. Its possible to be approved for a higher limit in less than a minute. You can also request a credit limit increase over the phone.
What Is A Good Credit Score
According to Experian, one of the three major reporting agencies, a credit score of 700 or above is usually considered good, with the full range of potential scores being anywhere between 300 and 850. The higher your score, the more likely you are to qualify for new forms of credit and get a lower interest rate.
- Build your credit history every time you spend money
- Works with your existing bank account
- Earn up to 1% in points for rideshares, coffees, phone bills, and more
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How Often Is My Credit Score Updated
Credit scores are created on demand and are based on from the three major consumer credit bureausExperian, TransUnion or Equifax. While it can sometimes feel like you’re checking a score that’s constantly being updated in the backgroundthat’s simply not how it works. A credit report must be requested and created, and then that report is scored.
With this in mind, it may be more helpful to ask yourself what’s changed in your credit report since the last time you checked your score?
Many changes can affect your scores, including:
- You applied for a new credit account.
- You opened or closed an account.
- A creditor sent an update to the credit bureaus with your most recent payment and account information.
- A collection agency reported a collection account in your name to the credit bureaus.
If you regularly check your credit scores, you may see that they move up and down quite often. The changes may be due, in part, to one of the above. Additionally, credit scores may use several time-related attributes when determining a score, such as the average age of your accounts or how long it’s been since a negative item was added to your credit report. As a result, even the passage of time can lead to changing credit scoreseven if everything else stays the same.
Look For Reporting Errors
In addition to seeing if your , checking your score regularly gives you an idea if you have credit score errors.
Its not unusual for banks and lenders to improperly report a monthly payment, credit account information, or even your personal information. Although these details should drop off your report within 7 years, your score can be negatively affected in the meantime.
Instead of doing nothing, you can dispute the reporting error. Note that it can take several weeks to correct the error. But once the error corrects, your credit score will be accurate.
As each credit bureau uses its own credit report to generate your credit score, you may need to file a separate dispute for each bureau.
Read Also: What Is The Good Credit Score
Keep Old Accounts Open And Deal With Delinquencies
The age-of-credit portion of your credit score looks at how long youve had your credit accounts. The older your average credit age, the more favorably you appear to lenders.
If you have old credit accounts that youre not using, dont close them. Though the credit history for those accounts would remain on your credit report, closing credit cards while you have a balance on other cards would lower your available credit and increase your credit utilization ratio. That could knock a few points off your score.
And if you have delinquent accounts, charge-offs, or collection accounts, take action to resolve them. For example, if you have an account with multiple late or missed payments, get caught up on what is past due, then work out a plan for making future payments on time. That wont erase the late payments but can raise your payment history going forward.
If you have charge-offs or collection accounts, decide whether it makes sense to either pay off those accounts in full or offer the a settlement. Newer FICO and VantageScore credit-scoring models assign less negative impact to paid collection accounts. Paying off collections or charge-offs might offer a modest score boost. Remember, negative account information can remain on your credit history for up to seven yearsand bankruptcies for 10 years.
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Also Check: One Main Financial Credit Score Needed
How Often Should You Check Your Own Credit Report
The Consumer Financial Protection Bureau suggests checking your credit reports once a year, at a minimum. Credit expert John Ulzheimer suggests a cadence of once a month. Until the end of April 2022, you can get your reports for free every week from the three major credit bureaus by using AnnualCreditReport.com.
When Not To Check Credit Score
There is no such time when to avoid the credit score. The importance of credit score has been talked about in every other financial article. It has to be a part of your yearly routine at least to stay updated and informed.
Even when you have good credit score, it is important to keep an eye on any drops in score or inaccurate information on your credit report and to ensure that it is maintained above acceptable thresholds. If it is on the lower end, make sure you change your habits and take conscious steps to bring it up. Also, minor changes on your credit report or credit score should not be a cause of concern as these are expected to happen. So checking credit score daily can be avoided.
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How To Use The Rule Of Thumb For Checking Your Credit Report
Checking your credit report not only gives you insight into each of your credit accounts, it allows you to view a list of companies that have checked your credit report within the past two years. At a minimum, you should check your credit report at least once a year to be sure the information is accurate, complete, and within the federal for negative information on a credit report. In most cases, a consumer reporting agency may not report adverse information more than seven years old or bankruptcies that are more than ten years old.
“Consumers are entitled to one free credit report from each of the major credit bureaus once a year. Consumers can spread them out to check them every few months, rather than checking all three at once,”Madison Block, marketing communications and programs associate at American Consumer Credit Counseling, told The Balance by email.
In response to hardships caused by the pandemic, you can check your credit report for free every week through December 2022, with AnnualCreditReport.com. The program was extended for another eight months in April.
While checking your credit report one to three times a year is a good rule of thumb, you can monitor your credit more frequently thanks to a number of free credit report services. These include:
Limits Your Requests For New Creditand The Hard Inquiries With Them
There are two types of inquiries into your credit history, often referred to as hard and soft inquiries. A typical soft inquiry might include you checking your own credit, giving a potential employer permission to check your credit, checks performed by financial institutions with which you already do business, and credit card companies that check your file to determine if they want to send you pre-approved credit offers. Soft inquiries will not affect your credit score.
Hard inquiries, however, can affect your credit scoreadverselyfor anywhere from a few months to two years. Hard inquiries can include applications for a new credit card, a mortgage, an auto loan, or some other form of new credit. The occasional hard inquiry is unlikely to have much of an effect. But many of them in a short period of time can damage your credit score. Banks could take it to mean that you need money because youre facing financial difficulties and are therefore a bigger risk. If you are trying to raise your credit score, avoid applying for new credit for a while.
Read Also: When Does Your Credit Score Update
When Shouldnt I Check My Credit Score
Its normal for small changes to occur daily, so checking too frequently can give you anxiety. Theres no need to be obsessive about it. But you should take a look routinely to make sure your credit is stable. Dont avoid checking your credit score if it is low it can help you find a reason and take the appropriate steps to improve your credit.
Better Understand Your Credit Health
Checking your scores will give you a glimpse into changes in your credit file. A sudden and unexplained drop in your credit score could tip you off to errors on your credit report. This gives you a chance to dispute the inaccuracies before they hurt your finances and loan options.
If you find errors in one of your credit reports, send the credit bureau that published the credit report a dispute letter explaining the errors and asking that they be corrected. You can do this quickly and easily using a .
Even if there are no errors, checking your credit score will tip you off if youre making mistakes with your credit accounts
The table below shows how different actions affect your credit score.
How Actions Can Change Your Credit Score
| Negative |
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Need A Loan Get One In 3 Simple Steps
If you are considering applying for a personal loan, just follow these 3 simple steps.
Apply
Apply online for the loan amount you need. Submit the required documentation and provide your best possible application. Stronger applications get better loan offers.
Accept
If your application meets the eligibility criteria, the lender will contact you with regard to your application. Provide any additional information if required. Soon youll have your loan offer. Some lenders send a promissory note with your loan offer. Sign and return that note if you wish to accept the loan offer.
Repay
The loan then gets disbursed into your U.S. bank account within a reasonable number of days . Now you need to set up your repayment method. You can choose an autopay method online to help you pay on time every month.
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Sign Up For Free Credit Monitoring
In addition to checking your credit score before applying for a loan or credit card, you may want to monitor your scores for large unexpected drops. These could indicate that you’ve missed a payment, or that someone has fraudulently applied for credit and opened accounts in your name.
Fortunately, you can get free Experian credit monitoring with real-time alerts. Experian also offers subscriptions to identity theft protection services, which include identity theft insurance and an option to get three-bureau monitoring and alerts.
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Why Should You Regularly Check Your Credit Report
The information in your credit reports could contribute to other errors, like outdated information and payment errors that hurt your credit scores. Your creditworthiness could be affected by that.
You may be able to improve your score by fixing an error
Further, if you have agreed to accept payment modifications due to the Coronavirus pandemic, make sure those payments are being reported correctly. Also, you might want to check the status of your credit before applying for a big loan or applying for a job.
Before Applying For New Credit
Its also not a bad idea to begin checking your credit score 3-6 months before applying for any new credit card or loan. This gives you ample time to try and boost your score or correct credit report errors before you apply. Since you can see your credit score for free, checking your score several months in advance is no longer a large expense like in the recent past.
Knowing your current score gives you a firm idea of what your approval odds are and what your interest rate can be.
Most banks report the hard credit pull for a credit card or loan application even if you dont get approved. Your score drops unnecessarily in this instance.
For example, you should apply for the best credit cards within your credit score. Having a 740 credit score lets you qualify for many of the best credit cards. If your score is in the 600s your approval odds can be slim.
The lender or bank might also provide your credit score when they do a hard pull. However, you only see your score after you apply and authorize a hard credit inquiry. By then, it can be too late to make any changes to improve your score.
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How Can You Quickly Improve Your Credit Score
You Are Planning On Borrowing A Large Amount
If youre planning on purchasing your first home and applying for a mortgage, youre definitely going to want to keep a close eye on your credit score to make sure that its as high as possible! You can save thousands of dollars on your mortgage with a higher credit score.
Outside of these situations, checking your credit score once a year should be good enough. Keep in mind that there are free services out there that allow you to monitor your credit.
You can check your credit score for free here: Free Credit Score
And you can check your report here: Borrowell
How often do you check your credit report and score? Let us know in the comments!
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Whats In Your Credit Report
Your credit report contains personally identifying information, including your birthdate, Social Security number, address, previous addresses, phone numbers, credit accounts and payment history. It may also include repossessions, collections, foreclosures and bankruptcy filings.
In addition, it has a record of who has accessed your credit information. You may see the names of your creditors, marketers , creditors youve applied to, and your own credit checks.
Is It Bad To Check Your Credit Score Too Often
Your credit score isnt impacted when you check your score or review your credit report because these are what are known as soft credit checks, so theres no downside to checking your score often. In fact, reviewing your credit report and credit score on a regular basis can help you keep everything up to date and catch any issues.