Credit monitoring is the tool that will allow you to track any changes in your credit score or credit report. When there are any changes, you receive an alert. You will then be able to look at the information and determine if it is accurate. For instance, you can get an alert when there is a new credit card account on your credit. If you are not the one who opened the account, you can notify your creditor that there is potential fraud.
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When you monitor your credit score, you will also be up-to-date with any changes that may occur on your account. You will know when there is an increase in your limit for credit or also when there is a payment that you missed. The alerts that you get will also include the changes that you make to your address or any of the public records. When you monitor your credit score, you will get to be in control of your credit identity. In addition to this, you will also be able to get rid of any unpleasant surprises when it comes to your credit.
Why You Need to Monitor Your Credit
When you have good credit, you are open to getting an approval on a car loan, personal loan, mortgage loan, or also a credit card. When you borrow money, your credit score is what will determine the interest you will be asked to pay. When you have a low score, it will be hard for you to attain any credit. In addition to this, the drives will also be high. To monitor your credit will be a good thing for you when you are looking to improve your credit standing. It will also be good to have the tool for monitoring credit if you are hoping to improve your financial health. This is because you will be able to see all the progress when the score is improving. In the case where your score drops, you will be able to change the course you are taking. You will then be able to plan better strategies for you to get to your goals. Monitoring your credit will also allow you to efficiently avoid any obstacles that may hinder your ability to borrow in the future.
Can You Prevent Identity Theft with Credit Monitoring?
No tool will be able to guarantee 100% identity protection. However, you will be able to address any inconsistencies very fast and prevent the danger that comes with errors and fraud. An excellent way of protecting your credit is by understanding your credit profile. When an individual tries to take a loan in your name or when you find a late report on payment by a creditor on an account that you do not know, then you will find out immediately. This will play a significant role in your identity protection. You will find, however, that you are not alerted to all the types of financial fraud. These tools will in most cases help you identify any signs of identity theft on the credit report.
How to Choose the Right Service to Boost Your Credit Score
The decision you make should be based on how detailed you want your monitoring to be. It will also depend on the amount you are willing to pay to get the tool. For those individuals who are careful when it comes to their credit, there are some common sense steps that they can take. They may not even need to pay the extra money to get the credit monitoring tool. Most of these credit companies will try to find any cases of fraud and also generate your score for credit. You will also find that some banks will offer the same kind of services. You may find that you get a better deal from a financial institution, and therefore you should look for those that offer these services in your area. Before you sign on any program, you should make sure that you consider the money you will need to pay.
Things To Know About Lenders Before You Apply
Before a lender hands over a big loan, they want some reassurance that you’re willing and able to pay them back, with interest. Rather than simply take your word for it, they’ll obtain your credit score from a reporting bureau. The value of that score will affect the terms of the loan you’re offered, including the interest rate. A good credit score will mean you get better loan terms and potentially save a ton of money in interest charges. Banks aren’t the only ones who are interested in your credit score. Landlords, insurance companies, credit card issuers can all potentially access your credit score to assess your creditworthiness and decide whether or not to do business with you. Since there are so many ways credit scores can affect your life, it’s important to understand what they are and how to manage them.
What Exactly is a Credit Score?
A credit score is a three-digit number that gives potential lenders a snapshot of your financial history in a nutshell. It’s derived by weighting various factors in your credit history. A higher number indicates greater creditworthiness. Your credit score is frequently recalculated as additional credit transaction history is analyzed and added to the score. Many people confuse credit scores and credit reports, but they are different things. A credit score is a single number. A credit report is a collection of credit-related data that a credit reporting agency has collected about you. Credit reports include records of loan payments, credit card balances, credit inquiries, and other credit transactions. A credit report can go on for pages. That’s a key reason that lenders prefer to use credit scores instead, because they sum everything up into a single number.
The Various Credit Scoring Models
Credit scores are provided by companies that specialize in analyzing financial history and assessing risk. Some scores are developed by credit bureaus and others are developed by outside agencies. Each credit score provider uses its own, unique formula to calculate credit scores, so your score will vary depending on the provider. The two most widely used models are FICO and VantageScore. When you apply for credit, you don’t get to choose which score is used. FICO is currently the go-to choice for most lenders, but VantageScore is gaining ground.
What is a FICO Score
The most widely used consumer credit score is the FICO score created by the Fair Issac Corporation. It’s calculated by taking into account five areas:
- Payment History (35%)
- Amounts Owed (30%)
- Length of Credit History (15%)
- New Credit (10%)
- Credit Mix (10%)
The above weightings are general guidelines; the content of your personal credit file affects how much impact each factor ultimately has. For example, people who haven’t been using credit very long may have different weightings than those who have an extensive credit history. FICO scores range from 300 to 850. Scores above 650 are generally considered good, but higher is better.
What is a “VantageScore” Credit Score
VantageScore was launched in 2006 as an alternative to FICO. It’s calculated based on the following factors (from most important to least important):
- Payment history
- Age and type of credit
- % of credit limit used
- Total balances/debt
- Recent credit behavior and inquiries
- Available credit
Current VantageScore credit scores range from 300 to 850, just like FICO. A previous model used a different scale (501-990) but that’s no longer in use.
How To Check Your Credit Score
Under U.S. Law, you’re entitled to receive one free credit report per year from each credit reporting company. You can get these through the website annualcreditreport.com. The free reports do NOT include credit scores. To get your credit score, you have several options:
- Get it from a credit card or loan statement: Many major credit card companies have begun providing credit scores on a monthly basis.
- Use a credit score service: Some of these sites are free, others charge a fee or require membership.
- Talk to a non-profit credit counselor: The counselor can often provide you with your score and help you understand it.
- Buy a score: You purchase your FICO score at myfico.com. VantageScore does not offer this service, but that score is available through some credit score websites.
It’s important to note that there are three major credit reporting agencies (Equifax, TransUnion, and Experian), and each one may have slightly different data about you. Therefore, your VantageScore or FICO score as calculated based on your Experian file may be slightly different than your score based on your TransUnion or Equifax files, though they should be similar. Your credit score is a dynamic number, and it’s normal for it to change over time. It’s a good idea to keep an eye on it as part of your routine financial planning. Checking either FICO or VantageScore will do the trick, as the same behaviors influence them both.