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You’ve done all the right things. You’ve made your payments on time for all your obligations. Your balances are low on revolving accounts. You’ve diversified your credit, limited your applications for new credit, and kept old unsecured debt accounts open. 

As a result, your credit score is in a solid place. The question now is how to keep it there. The good news is that because of the work you’ve already done; the main task is to stay the course. 

While sticking to the fundamentals is the most crucial part of keeping your credit score high, there are a few external and internal factors to watch out for. Like flying a small aircraft, once you’ve got the basics down, the main priorities are to keep an eye on your gauges and look out for the unexpected. 

Utilize credit monitoring 

From financial institutions to credit card providers to money management websites, there are several different sources for credit monitoring. You can likely even find a service that will let you track your score for free. With that being the case, monitoring your credit rating is a good idea. 

The idea isn’t to obsess over your score, though. Once you’ve built up your score, credit monitoring’s most significant value might be in its ability to alert you to unexpected information that is finding its way into your credit reports. 

Most of the time, erroneous data in your credit file comes from honest mistakes, whether that’s information being incorrectly processed somewhere along the line or someone else’s file being confused for yours. These mistakes can impact your score, so if you get an update from a credit monitoring service that looks fishy, it’s crucial to review your reports immediately. If your credit monitoring service provides you free access to your reports, take advantage of it. You can also access your credit reports for free once a year by visiting AnnualCreditReport.com or calling 877-322-8228. 

Once you’ve pinpointed the incorrect information hitting your credit file, your next step is to dispute the falsehoods being reported on your behalf. When you dispute information in your credit reports, you’re essentially requiring the company reporting it to the bureaus to prove that the data they’re showing for you is legitimate. If they can’t prove it belongs to you, they must remove it from your reports. 

You can complete disputes for each of the three major credit bureaus at: 

• Equifax 
• Experian 
• TransUnion 

Sometimes, unfamiliar data can show up in your file because someone is fraudulently accessing your existing accounts or stealing your identity to open new accounts. If that’s the case, it’s wise to file disputes for all information in your credit files you believe was not your doing. It’s a good idea to also: 

• Start a file containing all the information related to your identity theft and your efforts to resolve it 

• Check all your accounts for evidence of fraudulent use 

• Contact all companies you have accounts with to let them know about the situation 

• For any accounts that have been fraudulently opened or used, demand the company involved provide documentation about the account opening or activity in question. 

• File a report with your local police about the crime 

• Place a fraud alert with each of the three credit bureaus listed above 

• Order the additional free credit reports you are entitled to from the credit bureaus as a victim of identity theft 

• Consider putting a freeze on your files at the credit bureau websites, creating a barrier for anyone trying to open new accounts using your information 

• Run a virus scan on your computers 

• File a complaint with the Federal Trade Commission at FTC.gov 

• If you have identity theft insurance, file a claim 

• Change all account passwords 

Build your emergency savings 

Talking about savings might seem like a non-sequitur, given that we’re discussing credit reports and scores. However, with on-time payment history being the single-largest component of your score, it’s wise to think ahead.

You might be chugging right along now, stacking up timely payment after timely payment. But this is a good time to heed the old saying that the only constant is change. If a significant financial challenge were to come your way, would you still be able to keep up on all your obligations?

Having six months of your regular income in an emergency savings can help you keep your payment history rock solid no matter what life throws at you. 

Don’t obsess 

It’s easy to get sucked into the quest to see your credit score reach the 800-level. And once it’s there, you may want to squeeze out a few more points because your neighbor told you he has an 815 score. But the reality is that you’re not changing anything. The cutoff for where lenders typically start handing out their best deals is around 750-780. To borrow another old saying, anything above that is gilding the lily. 

If you become preoccupied with achieving the highest score possible, you may do more harm than good for yourself. For example, suppose you refuse to use one of your older credit cards because you want to keep your usage percentage low. In that case, the credit card issuer may close the account due to inactivity, potentially hurting your score by lowering the average age of your open accounts. 

If you’ve done the work to elevate your score to lofty heights, it’s time to relax and enjoy the fruits of your labor: The financial rewards that come with good credit. So, yes, keep an eye on your score, but try not to let it become a point of worry. It’s just not worth it. 

This article is for informational purposes only and is not intended to provide tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors for advice. Membership required. SRP is federally insured by NCUA.    

Article Credit: BALANCE 

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Your credit score can have a major impact on your life. Not only do creditors typically check your score when deciding whether or not to approve your loan application and what interest rate to charge you if you are approved, but landlords, insurance companies, and even employers often check it as well.

Having a good score can help you achieve your goals quickly and at the lowest possible cost. 

What is a credit score? 

Your credit score is a mathematical assessment of the likelihood you will repay what you borrow. It is based on the information in your credit report, which tracks your credit-related activity. Types of credit include credit cards, store cards, personal loans, car loans, mortgages, student loans, and lines of credit. 

For each account, your report shows who it is with, your payment history, the initial amount borrowed (for loans) or credit limit (for revolving credit), the current amount owed, and when it was opened/taken out. Your report also shows if you have experienced any credit-related legal actions, such as a judgment, foreclosure, bankruptcy, or repossession, and who has pulled your report (called an inquiry). 

There are three major credit bureaus that compile and maintain credit reports: Equifax, Experian, and TransUnion. Theoretically, all three of your reports should be the same, but it is not uncommon for creditors to report to only one or two of the bureaus. 

FICO score 

The most commonly used scoring model is issued by the Fair Isaac Corporation. Called a FICO score, it ranges from 300 to 850, with a higher score being indicative of less risk. 

Generally, those with a higher score are more easily granted credit and get a better interest rate. A score of 700 and above is typically considered good, while 800 and above is excellent. However, most scores fall between 600 – 750, according to Experian. 

If your score falls below 600, you will probably have a hard time getting a mortgage (many lenders require you to have at least a 620 or higher). To get the best interest rate, you usually need at least a 740. 

The following are the factors that are used to calculate your FICO score: 

• Payment history (35%): Making your payments on time boosts your score. Conversely, if you make a late payment, your score will take a hit. The more recent, frequent, and severe the lateness, the lower your score. Collection accounts and legal actions have a serious negative impact. 

• Amounts owed (30%): Carrying large balances on revolving debt, like credit cards, particularly if those balances are close to the credit limits, will lower your score. 

• Length of credit history (15%): The longer you have had your accounts, the better. 

• New credit (10%): This factor looks at the number and proportion of recently opened accounts and the number of inquiries. While many inquiries on your report will lower your score, all mortgage or auto loan inquiries that occur within a 45-day period are considered just one inquiry for scoring purposes. Accessing your own report is not damaging to your score nor are inquiries from pre-approval offers. Having new accounts can hurt your score, but if you have had a history of late or irregular payments, reestablishing a positive credit history will be taken into account. 

• Types of credit used (10%): Having a variety of accounts, such as credit cards, retail accounts, and loans, boosts your score. 

Since your Equifax, Experian, and TransUnion credit reports do not necessarily contain the same information, your FICO score from each bureau may be different. When you apply for credit, the creditor may only check one of your scores or check all three and average them or take the lowest or middle score. 

Improving your score  

Following these habits can boost your score: 

• Always pay on time: Your payment history makes up the largest chunk of your credit score, so making your payments on time is extremely important. 

• Pay down existing debt: Even if you have never missed a payment, a large debt load will lower your score. Explore ways you can lower your interest rates and free up cash to make more than the minimum payments. 

• Avoid taking on additional debt: Besides paying down existing debt, make an effort to not take on more debt in the future. For revolving credit, ideally you should not charge more than you can pay off in full the next month, but at the very least, try to keep the balance well under half of the credit limit. 

• Check your report for errors (and report them): Many reports contain score-lowering errors, so make sure to check your credit report from the three bureaus at least annually. You can get a free copy of your report once a year from the Annual Credit Report Request Service. Note: Equifax and Experian handle their disputes online, while TransUnion lets you submit your dispute through their website, by phone or mail. 

• Keep your old accounts: A long credit history with the same accounts indicates stability. 

• Limit balance transfers: While transferring balances to “teaser rate” cards can be a way to efficiently get out of debt, it can also have a detrimental effect on your credit score. The accounts will be new and likely have balances close to the limit to maximize the advantage of the low rate – two factors that lower your score. 

• Avoid excess credit applications: When you apply for credit, your score decreases just a bit. If you do it frequently, a creditor may see it as a sign that you need to rely on credit to pay your obligations. 

• Be patient: It may feel like credit mistakes can haunt you forever, but remember that your payment history from the past two years is much more important than what happened before that. Also keep in mind that most negative information is removed from your report after seven years. 

Obtaining your score 

When you apply for credit, the creditor may provide you with your score at no cost. Otherwise, if you want to see your score, you typically have to pay for it. There are a variety of services that sell different types of credit scores, so when you are purchasing your score, it is extremely important to pay attention to what exactly you are getting. 

Since it is the mostly widely used, it generally makes the most sense to purchase your FICO score. However, even then, keep in mind that you may not be seeing the exact same score a lender will see. (There are different versions of the FICO score available. Additionally, there are many creditors that use an internally-created scoring model in conjunction with or in lieu of the FICO score.) 

Checking your credit score can be helpful if you are planning to get a mortgage or car loan soon, and want to have an idea if you will get approved or qualify for the best interest rate. Otherwise, you may just want to stick with checking your credit report, which is available for free. Remember, your score is based on the information that is in your report. 

Contact Information 

Equifax 
www.equifax.com 
1-800-685-1111 

Experian 
www.experian.com 
1-888-397-3742 

TransUnion 
www.transunion.com 
1-800-888-4213 

Fair Isaac Corporation 
www.myfico.com 
1-800-319-4433 

Annual Credit Report Request Service 
www.annualcreditreport.com 
1-877-322-8228 

This article is for informational purposes only and is not intended to provide tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors for advice. Membership required. SRP is federally insured by NCUA.    

Article Credit: BALANCE