Why You Should Check Your Credit Score

Everywhere you look you see the questions - "What is your credit score number?" You don't know? You need to check your credit score and find out.

The number is not static. It is not like your horoscope or your birth date. It is more like a clothes size. Depending on the activity it can go up, or down. But unlike clothes sizes, you want it to go up.

Why? Because this is the measuring tool lenders use to approve your loans for things such as cars, houses, even credit cards. You score is tabulated according to your buying activity. If you make so much money and you owe so much money, that will affect your score. If you are late on payments, or skip a few, that definitely shows up.

The credit score starts at 800 and goes down form there. Every time an action occurs, the number is changed. Any bad marks and the number can plummet fairly quickly. It is like a financial report card that lets future lenders know if you have mastered the subject of money or not. Just like in school, you have a potential to keep an "A", but if you make mistakes or do not perform, the grade goes down.

Knowing this, it is important that your check your credit score often. This should be done annually, even if you are not about to apply for a loan. There can be mistakes made on your report that can adversely affect your score. Even if you have never applied for a loan in your life, do not assume your credit score accurately reflects this.

There are three major credit bureaus that report your financial activity. They are called Experian, Equifax and TransUnion. Each of their reports contribute to the height of your score. Therefore, you need to monitor any activity with all three bureaus. It is not that hard. In fact you can obtain this information for free. That's right.

You can get an annual report through the government for free each and every year. It is offered through the Fair Credit Reporting Act or FCRA. That way you can review all the transactions that are shown and verify that they were ones you made. Of course, you also need to make sure every transaction, like any payment you have made, is accurately reported as well. Be sure to review it with a fine tooth comb and reconcile it to your records.

What if you find something wrong? Then you must go to that reporting agency and get it worked out. The government only gives you the report. Each agency can help you figure out what went wrong and give you tips for repairing any damage done by false reporting.

Naturally the best time to do this is when you are not going for a loan or a credit card application. If you find an error, it takes time to be resolved. The last thing you need is another bad mark from a company denying you credit due to what's on the report.

After you check your credit score- how do you improve it? Here are some tips.

First and foremost, pay your bills on time, every time. Do not take on more debt that you cannot handle. Your credit score reflects your ability to handle money responsibly.

Secondly, pay off the credit cards, then only make purchases you can pay off in a month or two if at all possible. Your first goal will be to only owe up to 25% of your credit line at any given time. So if your credit limit is $1,000, never owe more than $250 on that card.

Third, if you are approved for a car loan, consider getting repo insurance. It adds to the monthly payment, but can improve your score, especially if it is lower than you want it to be.

If you have a checking account, make sure you have overdraft protection so if a check does bounce, it won't affect your credit.

Last but not least, keep an eye on your credit report. That is the best way to check your credit score.