Having credit can really be very exciting. However, the misleading sense of freedom that make us feel like we can buy anything we want, often makes us forget the fact that owning a credit card entails a great deal of accountability. After all the excitement, reality hits us hard as soon as we receive that first bill and realize how much money we actually owe. Knowing how much debt you have will make you realize how big of a responsibility being a cardholder is. Becoming too carried away by the perks credit cards offer can easily result to bad credit. People tend to spend way beyond their means as they get blinded by the illusion offered credit cards of free money. Moreover, owning a credit card also entails risks associated with information security like credit scams and identity theft. Considering these things, it becomes crucial to be more responsible about one’s credit account. One way of doing this is to conduct regular credit monitoring in order to check your credit score. This way, a cardholder gets to understand where exactly he or she stands financially, and whether he or she has some incorrect spending practices that need to be changed. Is Your Credit Score Doing Well? How to Check Our credit score is an important element in our credit reports that determine our level of responsibility as borrowers. Technically speaking, it is a three-digit number between 300 and 850 that is calculated from a formula that is designed to measure your creditworthiness. When talking about loan applications for example, evaluators look at the applicant’s credit score in order to get an idea how well he or she pays his dues on time, and how well he or she manages his or her debt overall. Hence, bad credit can mean a lot of problems. Your credit scores may entail significant changes or drastic effects; thus, it is important to know what your score is and what factors affect its range. Checking your credit score can be very easy. One way is to approach an institution that promises to give you an official FICO credit score, but not a credit bureau score. This will give you a few other details, aside from your credit score that will determine how well or how badly you are currently doing in terms of credit. Aside from this, you may also get free credit reports from the government-administered credit reporting agencies. Aside from your credit score is, it is also important to know the factors that affect your credit score. Understanding these factors will let you know why your credit score is either high or low: - Payment history – This is determined whether you pay your bills on time, including credit cards, student loans, utility bills, or any other lender or service provider that reports to the credit reporting agencies.
- Amounts owed – This includes the breakdown of your credit balance, and how they compare to the limits of what you’re allowed to take out.
- Years of credit – This identifies the age of your account(s). The longer your credit history, the better lenders can gauge your ability to repay.
- New credit – This determines how many accounts you have opened recently, and how many lenders have inquired about your credit. The more activity there is, the more it appears you’re about to face a huge debt.
- Types of credit – This is the mix of accounts you have, such as auto loans, credit cards, student loans, or mortgages.
Checking your credit report regularly helps a lot in improving your credit and overall financial situation. Moreover, it also helps protect you from threats like identity theft and credit scams. As responsible cardholders, our obligation does not stop at managing our finances as efficiently as we can. We also need to make sure that our credit score is in good health, so we can rest assured that we won’t encounter debt-related problems in the future.Amy Johnson is an active blogger who is fond of sharing interesting finance related articles to encourage people to manage and protect their finances. Follow her to know more on how you can check your credit score for regular credit monitoring.
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