Simply looking at your score can increase it.
It turns out that if you just look at your credit score, it’ll probably improve.
According to a survey from Discover, most people who check their credit score more than seven times a year believe it helps them improve their credit behavior – for instance, reminding them to pay their bills on time. Only 38 percent of respondents who checked their score once a year say that score actually improved.
“Checking your credit score is one of the simplest things that anyone can do to get on the path to understanding their credit health,” says Julie Loeger, Discover’s chief marketing officer. “Familiarity with your credit score could have a meaningful impact on your credit behavior.”
When and where does your score matter?
Almost 3-in-4 respondents said their credit standing was important to them. However, many don’t see how their credit impacted their everyday lives…
- Getting a job: 64 percent thought their credit standing had little or no impact
- Getting a favorable insurance rate: 47 percent thought their credit standing had little or no impact
- Renting an apartment: 47 percent thought their credit standing had little or no impact
- Getting a personal or student loan: 32 percent thought their credit standing had little or no impact
- Getting a credit card: 29 percent thought their credit standing had little or no impact
- Buying or leasing a car: 25 percent thought their credit standing had little or no impact
Why millennials are scrutinizing their scores
Young Americans are eager to check their credit scores – because most are paying off their balances in full every month. But it’s much more than just keeping a lookout. Millennials are more concerned about what it means for their financial futures, Discover says.
“Nearly half of millennials, 46 percent, said they associate their credit standing with their self-worth, compared to 43 percent of generation X and 30 percent of baby boomers,” the report said. Almost two-thirds of young adults said they connect their credit standing to their financial freedom and most millennial respondents said the biggest motivator for checking their credit score was either to improve it or maintain it.
Why you should check your score right now
Even if you think your credit score is horrific, knowing is surely better than not knowing. Bad credit could mean a snowball of problems in your future, such as higher interest rates on loans which will result in paying more money back over the lifetime of the loans.
The Consolidated Credit loan cost calculator will show you how much money you could pay on a loan because of a bad credit score whether it’s a fixed mortgage, auto loan, or personal loan. You can know what you’ll pay based on different FICO credit scores.
What’s in a credit score?
There are a few different factors in determining your credit score, and all are weighed differently. With a FICO score, your biggest determination is your payment history. It accounts for 35 percent of your total credit score. So if you’re making payments to your credit cards and loans on time, your payment history should be solid.
Credit utilization ratio is 30 percent of your score. How much credit you’re using out of how much total credit you have. Try to keep your ratio under 30 percent.
Length of history (15 percent), new credit (10 percent) and type of credit in use (10 percent) round out the rest of your credit score.
How to improve your score right now
Since payment history and credit utilization are the highest factors in your score, your best bet is to keep paying your debts on time and if you can, in full every month.
Avoid collections and late payments. Keep in mind that negative marks on your credit history will stay there for seven years and Chapter 7 bankruptcy will stick around for 10. The good news is that the older the information, the less impact it has on your overall score. Many times, newer, good marks outweigh the old, negative ones. Try credit counseling if you’re really trying to overcome debt and need help.