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Today’s guest post comes to us from Ed O’Brien, who specializes in credit repair. His blog, Credit Repair, offers free advice on preparing yourself for a financially responsible future.
Have you checked in with your credit score lately? If the answer is no, you really should take advantage of your consumer right to order your free credit reports from the major credit reporting bureaus.
Every American consumer who has established a credit history has the right to see how creditors are representing their financial activities. While the credit score is not a part of the free deal, it is definitely something you should also acquire to better understand not only your financial life but to ensure you are not missing out on other aspects of your personal and work life.
What’s In a Credit Score?
Your credit score is a three digit number that is calculated using a complex formula which entails how you pay your bills and manage your lines of credit. When the economy began heading south a few years ago, especially during the mortgage crisis, lenders began to demand better credit scores from consumers. Before the problems in the housing industry began, a good credit score was around 700. With that kind of a score, you were almost guaranteed the best interest rates on mortgages and the best deals on credit offers.
Since the economic crisis of the last two years, lenders tightened their purse strings and began to demand a much better credit reputation from applicants. Now, a credit score of 730 or more is considered the target number for consumers to reach to be afforded the best deals. Any score beneath that, a consumer should expect higher costs, more fees, and more denials on credit or financing applications.
Don’t Need Financing –What Now?
Many consumers make the mistake of dismissing their credit score as irrelevant because they have no need for financing, lines of credit, or loans. Their mistake lies in the fact that it is not just creditors who use credit scores to make decisions. Nowadays, the credit check is commonplace among landlords, insurance companies, and even potential employers. If you have a low credit score, you may not be able to rent that apartment you need or you may have to pay a lot more for insurance than other people do. If you have a checkered credit history, you can even be passed over for a new job for someone who is deemed more financially responsible, especially if you plan to work in finance or for the government.
How to Get Free Reports and Boost Scores
The FTC recommends all consumers with a credit history visit the AnnualCreditReport.com website to order their consumer credit score from the reporting bureaus. This is the only website that genuinely offers free credit reports. Many other sites and companies may promote ‘free’ but there is more often than not strings attached that cost you money, such as membership with credit monitoring services.
Credit scores are calculated based on the data creditors report to the credit bureaus and reflect your ability to manage your finances. If any of the information in the report is inaccurate, it can reflect poorly on your credit score. Simply by correcting mistakes on a credit report, you can boost your score.
The other method for improving your credit profile is to continuously pay your bills on time each month and live within your means so that you never overextend your credit. It is essential that you manage the money you have effectively for at least six months to see your credit score rise significantly.
You also need to ensure you are not doing things to bring your credit score down. Paying bills late or missing them entirely is a sure way to drop your score. You also should not apply for multiple lines of credit at any time, including auto loans and credit cards or close your current credit accounts.
Rebuild and Stay Active
Using the existing credit you have in a savvy manner can keep your credit score high and steady. Make simple purchases and pay off your total balance each month on your credit cards. By keeping accounts active and in a good status, you show you are able to effectively manage your finances which makes a big difference to a number of people who rely on credit checks for decision making. Every consumer has the power to get back on financial track and ensure their credit score is as high as it possibly can be. This is a key component to building a solid financial foundation for years to come.
How about you all? How often do you check your credit score and credit report? Did you know that you can get your credit report for free each year? Have you felt the tightening of credit requirements the past few years in your ability to secure loans?
Share your experiences by commenting below!
Jacob’s Thoughts – Listed below are my random thoughts as I was reading this article.
- The generally accepted belief/practice is that you have to pay to obtain your credit scores. However, there are certain places you can go to get your credit score for free. One of these resources is listed below. I haven’t used these yet, but it is on my list of things to do!
- CreditKarma.com – can be used to check your TransUnion credit score.
- I definitely fall in to the category as someone who has felt the effects of the credit requirements tightening over the past few years. I wasn’t able to get a loan for buying a condo in August of last year. You can read the details here.
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