Gather Little by Little

It is a good idea to know your credit score – it is an even better idea to know what is in your credit report. I typically check mine once a year and I checked it last month and found an error. Not a huge one, but on the list of names/aliases, there was a name by which I have never been known – same initials, but completely different name. I am working to get the error changed. You need to check your report for errors – unauthorized credit pulls, incorrect late penalties or missed payments, or even lines of credit that you did not take out.

I never used to think about my credit report, in fact, I am pretty sure that I applied for financing on several occasions before I even knew that I even had a credit card. Most of us are aware that we have a credit report, but some might think that if you don’t plan to apply for credit in the near future, your credit score is irrelevant. However, that is not quite the case. Many areas of our lives are affected by our credit scores, in fact, our credit report can be accessed by mobile phone providers, insurance companies, landlords, government departments and even potential employers.

How can I see my credit report?

Most people know that you can access your free credit report once a year at annualcreditreport.com. For the last couple of years, I have been obtaining a free monthly credit score via  a website called creditkarma.com. The score at Credit Karma is free, but no information beyond the numerical score is provided.

Changes

During the last year or so, banks and other lenders have been gradually raising the required credit scores for certain types of credit. Two years ago, consumers could easily get credit with a score above 680. Now, there are instances of credit cards being cancelled for folks with scores of 650 or even 660. In fact, the recent trend is that consumers are considered borderline until their score reaches 740!

Banks are watching your payments more tightly now than ever -even one late payment could get your cards canceled. Any sign of financial distress such as applying for cash advances can be a tip-off to lenders that you are under financial pressure. As a result, they might lower your credit limit or cancel your credit cards – thereby lowering your score even further. There have even been stories where using your credit card to pay for medical treatment can lower your score because it might reveal a lack of cash flow.

In light of the poor economy, most of us are starting to limit spending. Even a reduction in spending can lower your credit score because the credit card company could reduce your credit limit on the basis of low usage. I recently recieved a notice about one of my credit cards from American Express that had been cancelled due to the fact that I never used it. The following month, my credit score dropped twelve points. Seems upside-down in some ways . . . but my score should recover if I continue to be responsible with my use of credit and continue to pay off my debts.

The good news is that those of you with high credit scores – 750 and above – are probably getting preferential treatment from companies that offer financing. Retailers and lenders are desperate to add customers who pay their bills, the problem is that no one who has good credit (or any sense) is adding debt in this economy.

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