Credit may seem complicated, but the methods for maintaining a good credit score are pretty straightforward. Generally, if you manage your finances effectively, pay your bills on time and avoid taking on too much debt, your credit scores should be in good shape.
But that doesn’t mean you can just ignore your credit if you follow these practices. It’s important to pay attention to the information in your credit report to ensure that it’s fair, accurate and contributes positively to your credit score as much as possible.
While you can try to keep a watchful eye on your credit report yourself, signing up for a credit report monitoring service makes it much easier.
Here’s how credit report monitoring can help your credit score.
1. Regularly Check Your Credit Report
It’s a good idea to regularly check your credit report and read through it so you’re familiar with the information inside. Checking your credit report also helps you identify inaccuracies and even identify signs of fraud. You don’t want to be surprised when a credit application gets denied because of something in your credit report.
Credit report monitoring services can automate this process and deliver credit reports right to you. For example, MyScoreIQ services send customers regular copies of their credit report, from an annual frequency all the way up to monthly, depending on the plan. You don’t have to contact the bureaus yourself or pay for copies separately, as credit report delivery is built into the plan.
2. Credit Report Change Alerts
When new information lands on your credit report, it can immediately start to affect your credit scores. But you may not know your scores have been affected until the next time you check your credit report. New activity that can be found on your credit report includes:
- New credit accounts
- Hard inquiries resulting from credit applications
- Payment history
- Name, address and personal information changes
- Accounts in collections
If you only check your credit report once a year, that means new information can appear on your report and affect your score for an entire year and you would be unaware. Credit report monitoring plans frequently include score-change alerts, tracking your credit report for important changes and alerting you when there is new activity, so you can stay informed and respond accordingly.
3. Inaccurate Information and Identity Theft
Inaccurate information can land on your credit report and affect your credit scores. Inaccuracies may be the result of a simple issue or a sign that you’ve become a victim of identity theft. False information that can negatively affect your credit score includes:
- New accounts that you never opened
- Late payments that you didn’t actually miss
- Hard inquiries for credit applications you never submitted
- Accounts in collections that you don’t own
- Incorrect name, address and other personal information
If the information is inaccurate, you can dispute it to get it removed from your credit report. If the inaccurate information is the result of identity theft, it can be severely damaging to your credit score. But the faster you catch it, the faster you can respond and help prevent any further fraud from occurring.
With credit monitoring, you can utilize credit report change alerts to quickly identify false information and respond accordingly, removing it quickly so your credit report is as fair and accurate as possible.
Remember, you can get inaccurate information removed, even if you think it is currently helping your credit. Leaving false information on your report opens you up to further inaccuracies down the road, which can take much longer to untangle.
4. Credit Score Monitoring
It’s helpful to know where your credit scores stand, especially when you’re getting ready to apply for a loan, credit card, certain types of jobs or even rent a new apartment.
MyScoreIQ is a credit report monitoring service that offers FICO® Scores. Knowing how your FICO® Scores is calculated is important.
Your FICO® Scores are calculated based on several factors:
- Payment history: The single most important factor for your credit score is the payment history for your existing credit accounts. Making your payments on time builds positive payment history, while late payments can drag down your credit score.
- Amounts owed. How much debt you hold counts toward your credit score. This is especially important when it comes to your credit utilization ratio, or the amount of available credit you are using (think the balance of your credit card compared to the credit limit, across all revolving credit accounts). Using too much of your available credit can be detrimental to your credit score.
- Length of credit history. The longer your credit history, the more it benefits your credit score. Credit scoring models look at factors like the age of your oldest account, the age of your newest account and the average age of all your accounts.
- Credit mix. Credit scoring models consider the different types of credit accounts you have, from installment credit like mortgages or car loans to revolving credit like credit cards.
- New credit. The number of newer accounts you have on your credit report, and if you have many new hard inquiries for multiple types of credit applications, is factored into your credit score.
MyScoreIQ services can deliver your credit score along with copies of your credit report and alert you when your score changes. This can help you stay aware of the general health of your credit and track your progress over time.