Why You Should Stay on Top of Your Credit
So many things are affected by your credit — that adult financial report card of sorts — such as credit card interest rates, rental and mortgage interest rates, insurance rates, etc., so it’s definitely something you want to stay on top of. Today we’ll dive into what credit is, why it’s it’s important, and how you can check it.
Why Good Credit is a Big Deal
First things first—what is credit, and why should you care? In the simplest terms, your credit score is a numerical representation of your creditworthiness. It's a measure of how reliable you are in paying back money you borrow. Think of it as your financial reputation or, like I said before, your adult financial report card.
Credit scores fall in different ranges depending on the credit bureau, but a good goal is to keep it above 600, and ideally above 750.
Why is good credit so important?
Loan Approvals and Interest Rates: Whether you’re looking to buy a house, a car, or even start a business, good credit will be your best friend. Lenders use your credit score to decide if they should lend you money and at what interest rate. A higher score means lower interest rates, saving you potentially thousands of dollars over the life of a loan.
Credit Cards and Benefits: Good credit opens the door to the best credit card offers. I’m talking lower interest rates, higher credit limits, and amazing rewards like cash back, travel points, and more.
Rental Applications: Landlords often check credit scores to gauge how trustworthy a tenant might be. A solid credit score can give you an edge in competitive rental markets.
Insurance Premiums: Believe it or not, some insurance companies look at your credit score when determining your premiums. A better score can lead to lower rates.
Job Opportunities: Some employers check credit scores as part of the hiring process, especially for roles that require financial responsibility. A good score can be a mark of reliability.
Dating Apps: … Just kidding. But what if??
Credit isn’t just for big-ticket items like houses and cars. It’s woven into the fabric of our financial lives in ways you might not even realize:
Utility Accounts: Setting up utility accounts sometimes involves a credit check. A good score might mean avoiding hefty deposits.
Cell Phone Plans: Mobile carriers might check your credit before offering you the latest iPhone on a payment plan.
Emergency Situations: Life happens. If an emergency expense pops up, having good credit can provide a financial cushion through credit lines or personal loans.
Why You Should Check Your Score Regularly
Alright, now that we’ve established how crucial good credit is, let’s talk about why you should be checking your score at least once every other month or so. Here are a few reasons:
Catch Errors Early: Mistakes happen. You want to catch any errors on your credit report quickly so they don’t drag down your score.
Spot Fraudulent Activity: Regularly monitoring your credit helps you spot any signs of identity theft. The sooner you catch it, the easier it is to address.
Track Your Progress: If you’re working on improving your credit, checking your score regularly helps you see your progress and stay motivated.
Stay Informed: Life changes, and so does your financial situation. Regular checks ensure you’re always aware of where you stand.
How to Check Your Credit Score
Checking your credit score is easier than ever. Many financial institutions, credit card companies, and even budgeting apps also offer free credit score monitoring as a perk. If you sign up for a free account on CreditKarma.com, you can see your credit score there as well. None of these are guaranteed to be accurate, but they give you a good idea of where you are.
You can also get a free credit report once a year from each of the three major credit bureaus (Equifax, Experian, and TransUnion) at AnnualCreditReport.com. You’ll want to check your report every so often to make sure it’s all correct. Contrary to popular belief… credit bureaus are not immune to making errors. You don’t want to end up with poor credit because the credit bureau made a mistake! If your score is lower than you think it should be, check your report immediately to see if something fishy is going on.
Wrapping It Up
Good credit is more than just a number—it’s a key that can unlock many doors in your financial journey. By understanding its importance and keeping a close eye on your score, you’re setting yourself up for success. So, take a few minutes every couple of months to check your credit. Your future self will thank you!
