When’s the last time you checked your credit score? If your answer is more than a year, let this post be a reminder to you to go check it.
Credit scores may seem like an Orwellian report card on your spending habits (somewhere Big Brother sits watching at a credit bureau and smiling at all the beautiful, intrusive personal information), but if managed correctly it can be your ticket to lower interest rates, better deals and whether or not you have a place to live or work. Wielding an impressive credit score can give you bargaining power with creditors. Read Money in the 20’s for a good survey of the benefits.
However, having a good credit score goes hand-in-hand with checking your credit score. Luckily, this is one financial activity that is free. Several years ago, congress established a website called annualcreditreports.com. There you can access one free credit report from each of the three largest consumer credit bureaus, every year. This means that you can check your credit report for free if you access one report, every four months.
Perhaps you’ve never thought that checking your score is a necessity, but here are some reasons to make the effort:
I won’t offer up the latest news and scare you into paying for credit monitoring. I know people who have been affected by identity theft and I’m willing to bet that you have as well. You don’t need me to point out the time and hassle involved with cleaning up after identity thieves. So, if you aren’t willing to pay money for credit monitoring, you can do the job yourself, but you must be disciplined enough to check your score regularly.
Applying for Jobs?
According to MSN, in 2006 roughly half of employers ran credit reports on prospective employees. They also reported that the TSA won’t higher applicants with more than $5,000 in past due credit balances. You probably don’t need to check your credit score to know if you have thousands in delinquent balances. However, there is no such thing as a partial credit report. Giving access to a potential employer means that they will see your credit score and if you hold $40,000 in credit card debt. A credit report will help indicate if the credit you have is helping or hurting your employment image.
You Don’t Have a Clue What Your Credit Number Is
Isn’t it about time then?
A credit score is not something you can calculate on your own. In fact, each credit bureau will arrive at a different score for you. Your score is a complex, weighted average based on a number of factors like your balance to credit limit ratio, the total amount of credit you have access to, the number of times creditors have peaked at your credit score and your bill payment history.
These factors are affected by the credit decisions you make on a regular basis. Like applying for and closing credit card balances. You need to know where you stand so that small credit decisions don’t impact you later on.
Because You Aren’t Thinking About a Big Purchase
Do you need to check your score, because you think you may need to “fix” it in order to buy that house you saw the other day?
The best time to prepare your credit score for a large purchase is when you aren’t planning one. If your consumer credit does need some fixing, canceling cards, applying for new cards and transferring your debt from zero interest credit cards to zero interest credit cards can all impact your score negatively?
If you need to make major credit changes to improve your score in the long run, it’s good to make these changes when you know that a good portion of time will pass after tumultuously reversing your score’s trajectory. Even actions that positively impact your score like paying off a loan could take a few months to be reported to one of the bureaus.
You Are Leaving Your Parents House
You will need to good credit score to buy a house. You may also need a good credit score to rent an apartment. It’s not uncommon for a credit check to accompany a rental agreement (landlords like to get rent payments). Before you make plans to move out of your parent’s house, check your score. Poor scores can lead to higher security deposits, co-signers and even denial of a rental application.
You simply can’t fix what you are ignorant of.
Need help remembering that annualcreditreports.com site? Here’s an annoying social media video from the FAA (sorry to put you through this, but it is important).