Atomic Blog

Why checking your credit score can pay off

For many, credit scores come with judgment, risk, and security, which is why many Ohioans are paying attention to them.

  • Author Ohio Credit Union League
  • Posted December 10, 2018
  • Categories

In an Ohio Credit Union league 2018 consumer survey, 73% of respondents reported checking their credit scores within the past six months. That's compared to 18% who had checked within the last year, and 8% who'd last sought their scores more than a year ago.

The average American isn't quite as conscientious. According to a survey from WalletHub, 59% of Americans don't check their credit reports more than once a year.

But frequently checking scores and reports can be crucially important to financial health. Consumers who have a good idea of their credit score understand where they stand should they need to borrow money to fund a major life purchase. A low credit score, for instance, could hinder the purchase of a new house or car.

Consumers who regularly check their credit reports are also more likely to catch identity theft before it becomes a major problem. An unusual change in a credit score or report could be the first indicator of identity theft, a crime which affected 16.7 million victims in 2017, according to a MarketWatch article. By regularly checking credit reports, consumers may be able to spot credit inquiries they don't recognize - catching a potential fraudulent new account before it's even opened.

The average American may be checking their credit score less frequently than Ohioans, but it's not because they don't understand the importance. According to the WalletHub survey, 84% of Americans think they should be checking their credit reports more often.

The complexity of credit reporting is the biggest factor deterring people from checking their reports and scores. According to the WalletHub survey, 66% of Americans said they would check their credit reports more often if it were presented more simply.

Even Ohioans admit the system can be confusing. In the 2018 consumer survey, 17% of respondents said they knew the difference between a FICO Score and a Vantage Score. That's compared to 44% of respondents who have heard of the two scores, but don't have a clear understanding of what makes them different, and 39% of respondents who have "no clue" about FICO and Vantage scores.

Understanding how to maintain a good credit score isn't always simple. Here are some tips to help you manage your credit score.

  • Check your reports annually. Everyone is entitled to a free copy of their credit report from all three reporting agencies once every 12 months.
  • Be wise about opening and closing accounts. Think about how it might affect your credit score before opening or closing credit accounts. While it positively affects credit scores to have a wide array of accounts - including credit cards, personal loans, home equity lines of credit, etc. - it can be much more harmful to open more lines of credit than you can manage. Opening new lines of credit can also drag down your credit age, which indicates to lenders how long you have had experience with credit.
  • Make on-time payments. Payment history, or how reliably you make on-time payments, is the most important factor considered in calculating your credit score. This information indicates to potential lenders how likely you are to pay them back should they choose to lend to you.
  • Optimize your credit utilization ratio. Your credit utilization ratio is your debt-to-limit ration; it measure the amount of credit you are using compared to what you have available. High credit utilization rates may cause potential lenders to think you're overextended and unlikely to make timely payments on future debts.
  • Dispute errors. If you see something on your report that you don't recognize, don't assume it should be there. Contact both the credit reporting company and the organization or company that provided the information (that would be your lender or credit card company).
Comments
Blog post currently doesn't have any comments.