The secret’s out: Your credit score is an integral influencer when making financial decisions, and there’s no two ways about it. This three-digit number determines whether you will be approved for the new personal or home loan, which credit card you will qualify for, and the like. It also determines the rate of interest on your mortgage or auto loan.
Credit score ranges from 300 – 850. Ideally, it would help if you were striving for a perfect 850, but that’s in an idyllic world where you face no financial hiccups. In the real world, most financial experts argue that achieving 760 is a very good credit score and will help you get approved for most if not all, financial products in the marketplace.
As you already know, the intricate world of personal finance is fraught with complexities. You may need to realize when your credit score has dropped from a 760 to a 670. This is where credit monitoring comes to the rescue. It tracks your personal information and instantly alerts you of any changes to your credit report. In this guide, we will unravel the mysteries of credit monitoring and its importance and also offer additional tips to improve your credit score.
Credit monitoring tracks your credit and apprises you of any change to your credit report so you can immediately address suspicious activities and reduce the damage to your reputation.
Although you can do this manually, it is best to avail of free credit monitoring services so that the process is less time-consuming and automated. Also, these services will provide you with a comprehensive credit file.
The different activities reported by the credit monitoring service vary by provider. However, it usually includes the following:
- New accounts opened in your name
- Someone applying for a credit card in your name
- Name changes or new address to your credit file
- Payments and balances on your credit products
- Bankruptcies and other public records
- Personal information on the dark web, such as your email address, social security number, and passwords.
Credit monitoring is critical because, without it, you won’t know if a criminal is using your personal information to open new accounts or even using your credit for months. But by tracking your credit, you can instantly take steps to curb suspicious activities and ensure your personal and financial information is safeguarded.
A credit score is pivotal because it measures your ability to manage debt. So, if your score is high, it means you appear responsible in the eyes of lenders. For instance, a credit score of 850 is considered perfect using the FICO model 1.
If you have a high credit score, you will get better loan terms and fuss-free approval. An excellent or good credit score will save you hundreds of dollars over the course of your lifetime. Furthermore, you can look forward to getting better rates on auto loans, mortgages, and everything involving financing.
Financial institutions and lenders consider people with a high credit rating as lower-risk borrowers and offer them better fees, rates, and perks. Conversely, those with poor credit ratings are considered higher-risk borrowers, and very few lenders compete for them. This is why businesses get away with high APRs (annual percentage rates). Also, a poor credit score impacts the ability to rent a car, find rental housing, and even get life insurance.
- Scrutinize your credit report
From each of the three nationwide reporting agencies, you are entitled to receive one free credit report each year. If you request a report, it won’t impact your credit score.
You must carefully review the report closely, and if you need any errors, dispute them. When it comes to fixing your credit score, this is the closest you will get.
If you find that information on the credit report is outdated or incorrect, you must immediately notify the credit reporting agency so they can remove the false information.
- Create payment reminders
You can set up payment reminders online if you need help managing all your payment deadlines. Your credit score will increase if you consistently pay your bills on time.
- In a billing cycle, pay more than once (if possible)
You can improve your score and lower your credit utilization by paying your bills every two weeks instead of once a month.
- Sparingly apply for new credit
The total credit limit is increased if you apply for new credit. But this also hurts your credit score if you open or apply for several new accounts in a short time.
- Exercise caution when paying off old debts
If the creditor has charged off the debt, it means they don’t expect further payments. So, paying on a charged-off account means reactivating the debt but lowering your credit score.
- Diversify your accounts
It is critical to have a healthy credit mix, such as credit cards, student loans, auto loans, and mortgages. This accounts for 10% of your credit score. As long as you make on-time payments, you can add another element to your mix.
- Pay close attention to credit utilization
The credit utilization rate represents up to 30% of your credit score. It is the amount of revolving credit used by you and divided by the amount of available revolving credit.
- Take a quick loan
Do you have bad credit? Is there no way to improve your credit score? You can take a quick loan in small amounts. When you repay these loans, the credit agencies will be notified, and your credit report will improve. However, please note that this is a last-resort option. So, don’t forget to monitor your credit and follow the tips mentioned here to improve your credit score so you can quickly get a loan or be pre-approved for other financial products. Please note that even after implementing all of these methods, it will take about three to six months to see a noticeable change in your credit report.