Learn why verifying your credit score is super helpful

February 16, 2021

By Katie Levene

Learn why verifying your credit score is super helpful

reasons to check your credit score

Many of us don’t look at our official credit report unless we’ve applied for a loan or are thinking of opening a credit card. Plus, many banks and credit unions provide a quarterly credit score to their customers or members. So, why is it a good idea to look at a credit report once a year?

Let’s take a look at the four reasons to check your credit score with a credit report, how to check your credit score for free and why your score may have changed.

Four reasons to check your credit score

When you check your credit score with an official credit report yearly, you can know your financial health, ensure your information is accurate, check that your lenders report your payment history, avoid surprises when you apply for a loan or credit card, and remind yourself of your goals.

1. Know your financial health

Like a yearly doctor’s appointment, checking your credit score is a great way to check your financial health. Your credit report impacts your loan rates, mortgage rates and credit card approvals. It can even impact apartment applications, cell phone plans or job applications. In other words, it can make a big impact on your life.

If your score is not where you’d like it, it’s important to accept that truth so you can improve it! If you’re happy with your credit score, create a plan to maintain it.

When you check your credit report yearly, you can see your progress or what is holding you back.

2. Double check that the information is accurate

Personal information: Your credit report will have very important personal info including your name, address, Social Security number and date of birth. Don’t skip over this information. Always double check your info.

Credit accounts: Next, you’ll see your lending accounts and the info that goes along with them.

Take a look at your:

  • types of credit (credit cards, auto loans, mortgages, student loans, etc.)
  • the open date on those accounts
  • credit limits or loan amounts
  • balances (like your credit card balance and any lines of credit)
  • payment history

Verify what is on your credit report to ensure your lenders are reporting correctly.

Note: Closed accounts will be on your report for a while but some may drop off.

Inquiries: Your credit report also will show your soft and hard inquiries. Soft pulls don’t impact your credit scores but hard pulls do. Don’t forget to review this information as well.

Bankruptcies and collection accounts: Finally, if you have any bankruptcies or accounts in collections this will be on your report. As with the other sections, check these are correct.

If anything is truly inaccurate or missing, you can dispute your credit report online or by mail. Go to each of the credit bureau’s sites to make a dispute:

3. Avoid surprises when you apply for a loan or credit card

When you pull your credit report once a year, you can have realistic expectations when you apply for a new loan, mortgage, credit card or refinance. FICO credit scores range from 300 to 850 and fall into five different levels: poor, fair, good, very good and excellent/exceptional.

According to myfico.com:

  • Poor is any score less than 580
  • Fair is between 580-669
  • Good is between 670-739
  • Very good is 740-799
  • Excellent or exceptional is any score more than 800

With a better credit score, you may be approved for more types of loans, higher loan amounts and lower interest rates. This is because people with high credit scores are a lower risk to creditors.

4. Remind yourself of your goals

Each time you check on your finances, you inevitably remind yourself of where you’d like to be financially. Checking your credit score is a great yearly habit because it helps you take stock of how you’ve been doing and where you’d like to go.

Your credit score is just a number and does not define you but it is important. As with many important things, give your credit the attention it deserves and plan to maintain or build credit. You can do it!

How to check your credit score for free

Every 12 months, you can get a free copy of your credit report from each of the three credit bureaus. Visit annualcreditreport.com to access your report. This is the only site for complete and free credit reports.

To get a credit report, you’ll need to give your name, address, Social Security number and date of birth.

You can also monitor your report if your bank, credit union, or card issuer provides a quarterly update. It’s best to still pull a report yearly so you can stay on top of your financial health.

 

Check out these other articles to learn more about credit scores:


Katie Levene is a marketer fascinated with finance. Whether the topic is about the psychology of money, investment strategies or simply how to spend better, Katie enjoys diving in and sharing all the details with family, friends and Money Mentor readers. Money management needs to be simplified and Katie hopes she accomplishes that for our readers. The saying goes, "Knowledge is Power", and she hopes you feel empowered after reading Money Mentor.

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