Get closer to reaching your financial freedom. As a card holder and user, make a habit of checking your credit score report. Set an annual alarm to remind yourself of this essential financial obligation.
Earning money takes effort. Protect finances just by monitoring your credit score report. Know the reasons why it is essential and the advantages we can gain.
A credit score is a numerical rating that represents a person’s credit worthiness. It is based on information from their credit report, which includes details about their credit history, such as their payment history, outstanding debt, and credit utilization.
Knowing your credit score is important because of the following reasons:
You can monitor if there are any suspicious activities, check if your personal information is accurate, and see that all the accounts listed are under your name.
Taking a closer look at the purchases and confirming their validity prevents more significant fraudulent purchases.
In the FICO scoring model, 35% of your score relies on how good you are at fulfilling your financial obligations. So if you miss payments or are late, you can check it immediately.
The lenders will want to know if they can trust you to pay your debt on time, and the best indicator is your payment history which you can see on your credit score report.
A simple credit score report can tell how much you are using. It takes into account how much your revolving credit is.
For example, if you have a $3,000 credit debt and a $6,000 credit limit from all your cards. An excellent low credit utilization rate may indicate that you are doing good in not overspending.
Remember that your credit utilization rate accounts for 30% of your FICO score.
You can know the first time you had your credit card under your name or the first loan you took. If you were once an authorized user only, it would also show in the report.
For FICO scoring, this can contribute to 15%.
Be aware that if you file for bankruptcy, your credit history will start again from the beginning.
The lenders want to see if you can handle different types of credits like loans and credits. These types of credits make up 10% of your FICO score.
Other Factors that Affect Credit Score
There are several factors that can affect a person’s credit score. These are the following:
- Remember to maintain your old credit card history. Your credit account history will show your credit habits, and it is one factor that could be good for your credit score.
- If you close your credit cards, there can be different effects, it can increase your card usage rate, but it reduces your length of credit history and amount of available credit.
- These can also be a reason for a lower credit score.
- Credit application considerations are vital. If you want a new card, ask yourself why it is needed. Applying for multiple cards within a short period can harm your score.
- Most lenders request access to your credit report when you apply for a new credit account. This process is what they call hard inquiry or “hard pull.”
- Lenders will be looking thoroughly, especially if they see that you are considering having more accounts beyond your management capability.
- Knowing your credit score keeps you financially fit and ready to move to the next steps in attaining financial freedom. So mark your calendar and ask for your annual credit score report.
Checking your credit score annually is a vital step in maintaining a healthy financial life. By reviewing your credit score, you can gain a better understanding of your financial situation and take steps to improve it.
For example, if you notice that your credit score is lower than expected, you can take steps to improve it by paying off debts, keeping credit utilization low, and correcting any inaccuracies on your credit report. Additionally, if you are planning to apply for a loan or a credit card, checking your credit score ahead of time will help you know where you stand and prepare for the process.
It is important to keep an eye on any suspicious activity on your credit report, as it might indicate that you are a victim of identity theft.
By keeping track of your credit score, you can stay on top of your financial situation and make informed decisions about your money.
Frequently Asked Questions:
- Is requesting a credit score report free?
Yes, this is free. You have the legal right to request this from your authorized banks.
- Any tips on how to remember to request a credit score report?
- Set the alarm to remind you of your credit.
- Pick an important date, birthday, or year-end event, and develop a habit of requesting those events.
- Will checking my credit report affect my credit score?
Knowing your credit report will never hurt your score. On the contrary, it gives more advantages for you by knowing what is happening to your finances.
- Can a good credit score report help me get a job?
Some companies require your credit score report for specific important reasons. Get the job quickly by providing a credible credit score report.