Credit is a topic that many people feel uncomfortable talking about, but it is also a crucial part of your daily finances. There are many ways to build a strong credit score, but even more ways to screw it up if you are not careful!
Having a solid credit history and a low amount of debt on your lines of credit is the basis for good credit in general, but why should you keep track of your free credit score and report if you feel you know what your financial situation looks like? Good or bad, you should always be aware of your credit score and everything on your credit report.
Where Do You Find Your Free Credit Report?
Let’s start with the basics before diving into how it will help you track it. The first thing to know is that you have three credit reports.
-Experian
-Equifax
-Transunion
This is confusing for many people because they think it is just different companies reporting on their credit. While that is true, any other sites you go to will give you the information those companies report on your credit. The catch is that if you go directly to those sites, you will have to pay for access to your credit report. It is very affordable, and you will get all the information you need in one place, but you will have to pay a membership or report fee to get it.
Websites such as Credit Karma will give you your score for free, but they often provide only 1 of the credit reports rather than all three.
Federal law authorizes a website to give you all three of your entire credit reports once a year. It is AnnualCreditReport.com. These are not the only options, but they will get you onto the right path for finding your free credit reports, so you can be aware of everything you need to know.
1. You Will Be Able To Keep Track Of Inaccurate Reporting And Identity Theft
Have you ever tried to purchase something in the store, but your card gets declined, and you have no idea why? It is frustrating to find out someone stole your credit card number and used it for unauthorized purchases. What do you do? How do you fix it? Will it destroy your credit? How will you buy your coffee now? So many questions come up when it comes to dealing with identity theft.
What other information did the thief get? Are your other accounts compromised? What about your social security number? It can be a nightmare to deal with inaccurate reporting and identity theft. Having incorrect or fraudulent charges on your credit will damage your credit history and score.
Keeping track of everything reported on your credit will help you catch any problems that arise quickly as possible, so you can catch and fix them before they become unmanageable and detrimental to your credit score.
Some companies will monitor everything for you, which is a good option, but there are other ways to watch your credit for free, such as your banking app or free credit reporting sites you can use to keep track of your credit history. If you notice something does not belong on your credit report for any reason, contact your bank immediately and start the process of fixing it before it gets out of hand.
2. You Will Be Able To Better Manage And Maintain Your Credit
It does not matter if you are fixing your credit or maintaining your credit. Keeping track of your free credit score and credit history is imperative when keeping finances healthy. You will never truly know if your identity is safe and your credit report is mistake-free unless you keep track of it. This doesn’t mean you have to check it every day, but there are various ways to maintain your credit score other than actively checking it every day.
Bank apps have great programs that will notify you for free if there are any unexpected charges on your credit cards. They will also inform you of any changes in your credit report or unexpected new accounts opened. That is a great way to keep track of everything on your credit without making yourself crazy constantly checking it.
3. It Helps You Save For Future Expenses
Surprises on your credit report, unwanted charges on your credit cards, cards opened up in your name. These unexpected events and more can make it impossible to make large purchases on your credit when you need to because you need a strong credit history to make large purchases on credit.
When you are working hard to budget, save, and cut down on expenses for purchases such as a home or car, it is crucial to monitor your credit to ensure your score is where you want it and that there is nothing there that shouldn’t be there. It will derail your plans for the large purchase, and it is a headache to clean up a mess on your credit report.
It is stressful enough to set up your budget and save for a large purchase, but to have to clean up a mess you didn’t plan for makes it more difficult and expensive than it has to be. It is simple enough to set up free credit score checks utilizing the apps you are already using to help you.
4. You Will Be Able To Monitor How Much “Good Debt” VS. “Bad Debt” You Have
Most of the time, when you think of debt, it would be medical debt, credit card debt, etc., but there is debt that is “good” as well. It is essential to keep track of how much you are using on your lines of credit and how many loans you have out, including a mortgage if you have one.
When you have a credit card or any other high-interest debt, you want to ensure your balances don’t go over 30% of your credit lines. “Good debt” is debt that helps you because it is a steady rate with a regular payment over time, such as a mortgage. When you monitor your credit report, it will help you track how much debt you have and if it is debt that will help your free credit score or hurt it. Either way, it helps plan your future when you know what you are working with.
5. You Can Use It As A Guide To Fix Your Credit
When trying to clean up your credit, you should check your free credit score and full credit report from all three credit bureaus. As you go through your bills, you can use it as a source to verify what you owe, any incorrect reporting on your credit report if you have been the victim of identity theft, and how much you owe on each account.
(Please also note that it can take a few months for the credit bureaus to update your credit report when you pay off or settle your bills.) Even with the delay, it will be worth it to get it all taken care of in the long run.
It can be overwhelming to approach your credit when you are already aware of everything you owe, but you will be happy you did it when it is all over, and you are debt-free and set up on a new budget that will help you plan your financial future.
Final Thoughts
It's important to be aware of everything on your credit report. Your free credit score will not only be helpful for you in the long run, but it will also help you get organized. It is simple to set up, and you won’t have to worry about unexpected surprises catching you unaware because you will be up to date on any changes that occur.
This is a great way to stay on top of your finances, so you are set up for your financial future.
This article originally appeared on Wealth of Geeks.
Josh writes about ways to make money, pay off debt, and improve yourself. After paying off $300,000 in student loans with his wife in less than five years, Josh started Money Life Wax and has been featured on Forbes, Business Insider, Huffington Post, and many more! In addition to being a life-long entrepreneur, Josh and his wife enjoy spending time with their newborn son, their chocolate lab named Morgan, working out, being outside, traveling, and helping others with their finances! In case you were wondering, Josh uses Personal Capital to track his net worth and his first investment account ever was an Acorns account 😎