Why Should I Check My Credit Score?
If you always wonder why should I check my credit score then there are very good reasons to do so. First of all credit score is a footprint of your financial history over the years using which new creditors ascertain the risks involved in lending to you. Looking at a good credit score financial institution get the assurance that you are in a position to pay back the money you will borrow and will not default on the payments. A high credit score speaks about your financial capabilities and how you have been managing your finances.
If you have a credit score of 720 or more than getting approved for a loan, mortgage or home loan will be quiet easy and that too at lower interest rates and monthly payments. However if you have a low credit score then the opposite will happen and getting approved for any type of credit will be hard.
So the next question in your mind would be how I can check my credit score.
All three credit bureaus; TransUnion, Experian & Equifax allow you to get a free copy of your credit report once in a year. You can obtain the credit report online from the website annualcreditreport.com. After you have your credit report with you, the things to do are:
- Check the entries in the report to know if the creditor and accounts listed actually belong to you. There might be account entries showing as late payments while you know that you made the payment on time and if such errors are corrected will help in increasing your credit score.
- If an account was paid in full and closed but is still showing as open then you will need to contact the creditor and request him to send the updated information to the credit bureaus.
You need to tell yourself that I will check my credit score and correct wrong entries and also take steps to improve my credit rating as credit score is one of the most important factors that creditors consider while deciding to approve or disapprove a loan application.
It is also a factor which can help you save a lot of money by way of lower interest rates and monthly payments. In this regard you need to know that various points are taken into consideration while deciding upon a persons credit score and have certain percentage based on their importance in the scoring system such as:
- Your payment history (35%)
- Current unpaid debts (30%)
- Overall credit history (15%)
- Type of existing accounts (10%)
- New applications for credit (10%)
By keeping a watch on these factors you will be able to take proper steps for improving your FICO score.
- The basic thing you can do is pay all your creditors in time to maintain good credit history.
- Check credit report on a regular basis to make sure you are not a victim of identity theft and that someone else is not using your personal information to open a credit account.
- Do not keep a lot of credit card accounts and maintain the existing accounts in proper standing.
- Avoid too many creditor inquiries also known as hard inquiries on your account as each inquiry can result in reducing your credit score by a few points.
Tell yourself that I will check my credit score on a regular basis and try to improve it as this is one vital factor which can have major influence on your future necessities, be it getting a mortgage, applying for a job or getting a house on rent.