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Credit Report

Why You Need to Keep an Eye on your Credit Score

And Your Credit Reports, Too

By Catherine

You need to keep an eye on your credit score because it’s important. You might be surprised that it’s lower now than it was a year ago, even if you've made an effort to spend less and save more.

Continue to keep those credit cards in your wallet.

Your credit score could be lower for a variety of reasons.

• Perhaps your bank lowered your line of credit in a home equity loan because the value of your home has gone down lately.
• A credit card company can do the same thing and lower your borrowing limit. They might also cancel any inactive cards you have, which would limit the company’s risk.
• Availability of credit is an important factor when figuring out credit scores and such changes would lower the amount of credit available to people.
• Consumer credit counselors believe that changes in credit limits are one huge reason for credit scores that are falling. These often can catch consumers by surprise. Banking institutions and other lenders must give notice, at least fifteen days, but they don't have to get your permission before reducing your credit limit.

Open your mail

Read your credit report at least once a year. There are three credit agencies and you should visit with one every four months to make sure everything is in good order.

Stolen identity is a problem and only people who view their reports will be able to catch inconsistencies before they become a problem.

You are entitled to a free annual credit report, thanks to federal law, so there's no excuse to not check them regularly. Go to Annual Credit Report and see the information for yourself. Those three major credit reporting companies - Equifax, Experian and TransUnion - are authorized by federal law to provide the free reports for your information and use. You can even dispute the information that is incorrect.

Be sure to have some account numbers available as the site will take you through some questions before displaying your credit report. It will be available for a series of time before it’s no longer available.

You can also call (877) 322-8228 to order the reports and get them delivered by mail. Keep in mind that it will take a few weeks for the reports to be delivered by mail.

Check on your credit score too.

You can get some companies to reveal your credit scores "free of charge" but only during a trial period. Be sure to cancel during the trial period or you'll be charged a monthly fee to continue seeing your credit report and scores.

You can always purchase your credit score. At many different sites, consumers can order a copy of their credit report and FICO credit score at the same time. FICO scores are what major banks and other lending institutions use when reviewing loan applications. The lower your score, the higher the interest rate you will pay.

Knowing your score is beneficial beyond satisfying your curiosity. If you're planning a major purchase, like a home or car in the coming months, you should know your score before the banks do.

Avoid trouble

If you learn ahead of time that you have unpaid balances, take care of them and make future payments in a timely manner. Every little bit helps.

If you have several credit cards, avoid cancellation by using some of them so they aren't inactive over the course of a year. Cancellation hurts your credit score. Stay organized and keep track of what card needs to be paid and when the bills come due.

Don’t miss a payment because that will damage your credit report and score as well.

Stop impulse shopping. Cut up some credit cards and cancel them so you don’t get tempted to run up debt.

In the short run, your credit score could go down. But unless you plan on making a major purchase in the next few months, it's not going to affect you too much.

Don’t open new credit card accounts if you’re planning on making a big purchase. You’ll have more credit, but companies will see it as more risk and your score will go down.

There are no quick fixes to lower your credit scores.

You should not hire companies to "erase" bad credit. You cannot dramatically improve credit scores. Such companies simply challenge any problems on the credit report. This forces credit reporting companies to temporarily remove items, but they will come back if they are legitimate.

Beware of any companies that promise to settle outstanding debt for a fee. The companies collect a lot of money, but if they don't follow through, you are left with the debt and less the money you paid to get rid of it.

4/3/2009

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