Here's Why You Should Check Your Credit Score Frequently

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A higher credit score could boost your chances of securing loans and lower insurance premiums. Pexels

Credit score is an important aspect of your financial life. After all, it affects your loan, mortgage, rent, and job applications. If your loan application gets rejected or your insurance premiums are way higher than they're supposed to be, it might be because you have a low credit score.

Nowadays, landlords often check credit scores of potential renters to understand if they are capable of paying rent on time. Employers also usually include a credit review in background checks to assess the candidature of a job applicant, especially for higher management positions.

Which Factors Affect Your Credit Score?

Major credit bureaus like TransUnion or Experian use the Fair Isaac Corporation (FICO) series model to compute the credit score of an individual. The credit score range in the model is from 300 to 850, where a higher score usually means that you come across as a low-risk borrower with a credible history of upholding your financial responsibilities.

Credit scores are primarily based on your loan repayment history, usage of credit card balance, number of loan accounts, and the frequency or number of credit enquiries and loan applications.

Frequently checking your credit score from credit bureaus will help you assess the factors that might be negatively affecting your credit profile and work towards them. However, there may be several vital factors out of your control that could tank your credit score, as well. These factors include incorrect reporting or identity theft.

Erroneous Entry and Credit Frauds

A recent Consumer Report of 5,858 individuals revealed that 34 percent of them found at least one error in their credit reports and 29 percent witnessed errors regarding their personal information. An incorrect loan record or late payment entry or a hard enquiry in your credit report could stay for years, though. It could even prevent your credit score from improving while portraying you as a high-risk borrower to lenders. The only way to find out about erroneous entries is to keep track of your credit profile. This way, you can swiftly dispute any errors with the concerned credit bureau for investigation and rectification.

Moreover, if you notice any loan records or inquiries that don't belong to you or any enquiries with a mismatch of your personal details, it could even be credit fraud and identity theft. If fraudsters get a hold of your social security number, date of birth, driver's licence number, or financial credentials; they might attempt to impersonate you, take out loans in your name, or file fake tax returns.

If you suspect fraudulent activities in your credit report, immediately contact the associated lender as a starting point of investigation. Then, place a fraud alert on your credit report with the help of credit bureaus. You may also raise a dispute with the credit bureaus who will contact the creditor to verify the details. If you are not satisfied with the outcome, you may proceed to fill in an identity theft affidavit and lodge a complaint with the nearest police station with copies of the credit and dispute reports.

If you don't check your credit score, you might not find out of such developments until substantial damage has already been done to your credit rep and finances. One easy way to keep track of these activities is to sign up with a credit monitoring service that can scan your credit reports for any new enquiries by a lender, new credit card or loan accounts, late payment entries, credit limit chargers, and changes to your personal information.

All-in-One Tool to Stay on Top of Your Credit Profile With Free Credit and Identity Theft Monitoring

A California-based firm called Credit Sesame offers an intuitive online platform to check your credit score and report for free from the major credit bureau TransUnion without requiring any credit card details or commitments. Since 2010, the firm has raised over $171.5 million in funding. They help over 15 million people monitor their credit profiles, offer possible protection from identity theft, and assist in raising disputes to credit bureaus.

Credit Sesame updates your credit report every month with a detailed breakdown of your credit accounts, loan payments, and credit usage in one place. They fetch your credit profile with a soft pull so that your credit score doesn't get affected, either.

On top of that, you can avail of their free credit and identity monitoring services to get notified of any changes to your credit profile in real-time. For more extensive protection to your credit profile, you may also opt for their paid premium services that come with daily credit score updates, social security number monitoring, and 24/7 live dispute resolution assistance.