Your credit score is a crucial aspect of your financial profile – it provides information about your eligibility to qualify for a mortgage, credit card, job, rental home, business loan and vehicle. Surprisingly, many of us remain oblivious of our credit score until we are denied a mortgage, quoted a high interest rate on an auto loan or disqualified from our dream job.
This is why you need to keep a close check on your credit report. It is essential to be aware of your credit score and learn how to improve it. Federal laws entitle you to check your credit report for free from any of the major credit bureaus (Equifax, TransUnion and Experian), once a year. You are also eligible to request an additional report if you are denied credit.
Credit Score vs. Credit Report
Your credit score, also known as Fair Isaac Corporation (FICO) score, is a three digit number that shows your creditworthiness. Ranging from 300 to 850, your credit score helps lenders to determine your ability to repay credit; in this regard, the primary score issued by FICO is considered to be the most accurate assessment. In addition, the credit score issued by each of the three major credit bureaus may have some disparity.
A credit report, on the other hand, contains your credit history and helps in analyzing the components that determine your credit score. It is suggested that you regularly check your credit report in order to identify any discrepancy and get it rectified at the earliest. Errors in your credit report may happen frequently and can wreck your credit score.
Tips to Monitor your Credit Report
Examine your Credit Score
The main rule of thumb is to check your credit report from the credit bureaus, at least once every four months. For instance, you can check Experian in January, TransUnion in May and Equifax in September. The bottom line is to keep a regular check on your credit report in order to detect any discrepancy, at the earliest. Check the accuracy of all credit information available in your credit report, verify your payment history, account numbers and balances, ensuring there are no errors or discrepancies.
Compare the information that is provided by each of the credit reporting bureaus. It might happen that all the creditors may not report their information to all three bureaus. Hence why the information provided by each of them may differ.
Take a smart approach and responsibly use your credit. Proactive monitoring of your credit report is an effective solution to keep your finances in control and achieve your financial goals.