Credit monitoring is an essential aspect of financial hygiene. Seeing your credit report can help you visualize your overall financial health and help you prioritize payments.
By regularly monitoring your credit, you can stay aware of all the credit accounts you currently have open and keep on top of their respective balances and payments.
There are many ways to monitor credit scores, depending on how hands-on you want to get with the process and whether you’re willing to pay for a professional credit monitoring service. No matter which methods you use to keep tabs on your credit, you’re entitled to the same rights through the Fair Credit Reporting Act.
Your credit information is considered confidential and can only be disclosed to anyone with a justified purpose or to whom you give permission. On top of this, companies providing information to the credit bureaus are legally obligated to investigate any disputes you bring as a result of what you find in your credit report.
Here’s more about how to monitor your credit and how frequently you should check it.
What Is a Credit Score?
A credit score helps lenders measure your creditworthiness. There are two major scoring models — FICO and VantageScore — that determine your credit score based on information in your credit report.
Credit scores range from 300 (poor) to 850 (excellent). Scoring models use five main factors to determine your credit score: payment history, balances owed, age of credit history, credit mix, and recent activity. Each factor is weighted differently, but payment history (35%) and balances owed (30%) are most influential to your FICO Score.
Your credit score affects everything from credit card approval to your interest rate for a mortgage. Because your credit score has such a big impact on your financial life, it’s important to maintain a good credit score and check it regularly.
What’s the Difference Between a Credit Score and a Credit Report?
Your credit report is a record detailing all of your credit history, while your credit score is a numerical score calculated based on the information in your credit report. To use an analogy, if your credit report is a report card detailing all your past assignments, your credit score is your final grade in a class.
One important thing to know is that you can dispute information on your credit report, but you can’t dispute your credit score. If you notice any errors or inconsistencies on your credit report, you should report them to the credit bureaus immediately to avoid any negative effects on your credit score. Conversely, if you notice a sudden drop in your credit score, you should check your credit report to discover why and report any potential mistakes.
Also remember: you’re legally entitled to free credit report checks regularly, but there’s no such law regarding your credit score. Most credit card companies and banks provide credit score updates for free.
Which Credit Score Should You Check?
There are multiple versions of your credit score. This is because the three credit bureaus — Equifax, Experian, and TransUnion — all compile your credit report separately.
FICO and VantageScore are the two most commonly used scoring systems. There are also different versions among those two scoring systems, such as FICO Score 2, VantageScore 4.0, FICO Score 5, or FICO Score 8. These different versions might be industry-specific or take some additional scoring factors into account. According to FICO, the FICO Score 8 model is the most widely used version of FICO credit scores.
Lenders choose which credit bureau to pull your report and score from and which scoring system to use. For large loans such as mortgages, lenders might pull your credit score from multiple sources and use the median. If you’re applying for a specific loan, it’s worth asking the lender which scoring system and credit bureau they use.
Understanding Your Credit Score
Credit scores range from 300-850, with 850 being the highest. The higher your credit score, the more likely you are to be approved for a loan or credit card with the best interest rate.
Since there are multiple different versions of your credit score, thanks to different formulas and approaches used by different credit bureaus, it can help to view any given credit score as a general representation of your creditworthiness. Different lenders use different scores, so the score a mortgage lender uses might slightly differ from the score a credit card issuer uses.
Most lenders use the FICO score, according to the Federal Trade Commission. Whatever score different lenders use, the higher the better in terms of getting the best rates. But because different lenders use different scores, the Consumer Financial Protection Bureau notes it can pay to shop around.
How to Check Your Credit Report and Score
1. Check your credit report with AnnualCreditReport.com
You’re entitled to one free credit report from each of the three credit bureaus — Equifax, Experian, and TransUnion — each year. However, the credit bureaus made credit report access available on a weekly basis in response to the COVID-19 pandemic in 2020, and that program was later extended through Dec. 2023.
2. Check your credit score
Your credit report will usually not show your credit score, and the law does not require the same free access to your credit score as your credit report. But there are several ways to access it. Most banks and credit card companies provide your FICO score for free. Check your monthly bank statement or log into your account online. If you can’t find it, call your bank or use their chat service to ask if they provide your credit score and where to find it.
Just remember, there are several versions of your credit score depending on which scoring model is used. The score you check via your bank or credit card account may not be the same score a lender uses to determine your creditworthiness.
3. Regularly monitor your credit health
It’s important to regularly monitor your credit health based on the information found in your report. Catching and fixing inconsistencies or mistakes on your credit report early can save you from being blindsided by a sudden dip in your credit score and help you spot opportunities for improvement.
There are also a variety of credit monitoring services that can help you. These services typically offer perks like frequent access to your credit score, notifications when changes are detected, and suggestions for ways to improve your credit score.
The disadvantage is cost. Credit monitoring services offered by the major credit bureaus (TransUnion, Equifax, and Experian) range from $19.95 to $24.99 a month, and if you’re trying to build your credit, spending more money may not be in your best interest.
You can instead monitor your credit health yourself by taking advantage of free credit reports and credit score access. Save money and take control of your finances at the same time by self-monitoring using your free credit report. If you make a habit of combing through your report regularly, looking for potential errors or areas of opportunity, you don’t need to pay for the service.
4. Beware of scams
The FTC warns of imposter websites that pretend to offer free credit reports but end up charging hidden fees or even selling your personal information, including your Social Security number. The only website authorized to provide the free credit reports required by law is AnnualCreditReport.com.
5. Practice good credit habits
Remember: Your credit score is never set in stone. Even if you have a good credit score, make sure to continue practicing good credit habits like always paying off your balance on time and in full and keeping a low credit utilization ratio.
If you have no credit history or bad credit history, checking your credit report and score is the first step to improving your credit. You need to have a full picture of where you stand now in order to understand what you should be doing differently and spot opportunities for improvement.
Why It’s Important to Check Your Credit Report
Checking your credit report is important, whether you’re building or simply maintaining good credit. By checking your report regularly, you’ll know exactly where your debt currently stands and can make sure all three credit bureaus are reporting information correctly. Errors are not unheard of. In fact, the FTC (Federal Trade Commision) has found one in five people find an error on their credit reports at least once in their lifetime.
Checking your credit report is also an essential step in protecting yourself from identity theft.
“If someone is out there applying for an account in your name, the earliest sign will show up on your credit report as an inquiry,” says Bruce McClary, vice president of communications at the National Foundation for Credit Counseling. “The key to shutting down credit fraud or identity theft is to respond as quickly as possible.”
How Often You Should Check Your Report
At a minimum, you should check your credit report from each bureau once a year, taking advantage of the free annual credit report you are entitled to by U.S. law. But with free credit reports now available every week through Dec. 2023, you can also check your report more often.
How often you check may depend on your current credit activity and whether you’re actively taking steps to build or improve your credit. While you’re unlikely to see significant changes from week to week — it often takes lenders at least a full billing cycle to report updates to the credit bureaus — there’s no harm in pulling the reports as frequently as you’d like.
How Does Your Credit Score Impact Which Credit Cards You Qualify For?
Your credit score has a big impact on the credit cards you qualify for. The cards with the best rewards or premium perks typically require a good to excellent credit score, around 670-850. If you have bad credit or no credit, student credit cards and secured credit cards can be good options to help you build credit, even if they don’t come with as many benefits.
However, your credit score isn’t the only thing that matters on your credit card application. Lenders may also look at your credit utilization ratio, your debt-to-income ratio, and outstanding balances on your other cards. For the best chance of qualifying for the cards you want, make sure you’re paying off your balance on time and in full, and don’t apply for too many new cards in a short period of time.