With the current economic crisis facing our world, credit has become an all important tool in our financial lives. Without it, we would not be able to obtain some of the necessities of life. You may want to know, how do I check my credit scores to ensure that I am creditworthy? There is so much attention surrounding fico scores these days and alternative scoring models, but this is not the only aspect of your financial history that you should be concerned with. From the European Debt crisis to the current US election, the financial sector is undergoing a period of rapid change.
It is important to annually review your three bureau report at least once a year for inaccuracies and potentially negative items, as this will affect your scores across the three major credit bureaus who report your credit to lenders.
The three rating agencies, Equifax, Transunion and Experian use the FICO scoring model to arrive at your credit scores.
Each bureau uses the information they have in your personal file to arrive at your score and no one of the three will be the same.
This is because the information in each of your bureau reports will be different because some of your lenders may use only one of the bureaus to report your information to while some use all three.
The bureaus use the information they have to calculate your scores from your credit reports.
The Key Pieces That Impact Your Credit Scores
Some of the most important information contained in your report that the major bureaus use to calculate their scores are the age of your accounts, your most recent account opened, number of revolving charge accounts and amounts of balances, payment history, any bankruptcies on file, mortgage information and amounts, as well as how much open money you have extended to you.
All of these factors regarding your history affect your score and ultimately your credit worthiness.
One of my favorite ways to check your credit score is register and sign up with a credit monitoring service. You can obtain a free credit check from the three major credit bureaus through annualcreditreport.com. The Fair Credit Reporting Act made it into law that you have the right to view what is in your file at least once a year, and that the major bureaus are to provide you with this information free of charge. However, they do not have to provide your scores and you will need to subscribe to a service and pay a fee to view them. Some sites offer one of your free scores along with your report, but it is best to monitor all three of your reports and scores.
The Advantages of A Monitoring Your Reports
These services will contact you if there are any changes to your reports such as newly opened accounts or accounts going into collections. These services also offer identity fraud protection which is a huge benefit and can provide peace of mind if you wish to protect your history and scores.
Identity theft is a growing concern and by subscribing to a monitoring service you will be alerted to any changes on your report that you did not authorize so you will not become a victim of this crime.
Some other services will provide you with a free score without credit card information. You can use this information to get some idea about your score range, but remember that you will need to get all 3 scores to make a fair assessment of your standing. The monitoring service you subscribe to will keep you one step ahead with keeping track of your file and knowing what it contains at all times.
What if you don’t want to pay for a monthly monitoring program?
There are many monitoring services online that will allow you to sign up for a free trial and provide you with your reports and one of your scores. After which you will be charged a monthly fee for the service depending on what features of the service you sign up for. It truly is worth the price and the value you get from the service is priceless. However, if you don’t want to stick with a recurring payment plan- you can cancel the service before the free trial ends.
What’s A Good Score?
There is a wide range used to define creditworthiness. A range from 300-800 seems to be the average range of consumer ratings.
The lower end of this range (up to 650), will put you in the bad to poor score range; in this zone you will pay increased APR’s and may not qualify for financial loans.
Scores over 700 and higher, will put you in the good to excellent range and you will qualify for the top lending rates and consumer loans.
What To Do After A Financial Setback
If you are having money problems and need to re-establish your good standing, there are a few simple things can do to improve your numbers even after bankruptcy. One of the best ways to start, is to get a “secured card” that will help you re-establish gradually. This will improve your fico score the right way by showing that you are worthy of loans and can be counted on to repay your debts on time and consistently. A smart way to expedite this process is to pay more than the minimum payment due each month. This will help to rebuild your reports and improve your score over time if you maintain an excellent history with the creditors who will report your positive information to the bureaus.
Another thing that makes for a good score is having a good mix of different types of credit. At one point or another, you will need more than just charge cards on your file’s history. It is never to early to work on this and establish a healthy mix of auto loans, mortgages, revolving charge accounts, as well as other types of consumer loans. This good variety of loans when maintained over time, will give you an all around solid score because this is another factor that the credit bureaus will look at when calculating your scores. Having a long history of diverse credit will reflect well on your ability to manage and maintain credit.
So if you have any questions about items in your report, keep in mind our advice on checking your rating but maintain good standing and protect your identity as well. In an ever changing world we need a system of checks and balances in place to manage our financial lives so that we can become more prosperous and improve our standard of living. Having easy access to our financial information is just one of the things we can do to ensure our security now and into the future.