Identification of Factors Influencing Credit Scores
The FICO credit score is influenced by five key factors:
- Payment history
- Amounts owed
- Length of credit history
- Credit mix
- New credit
By consistently monitoring your credit over time, you gain insights into how your actions in each of these areas impact your credit score positively or negatively. For instance, a temporary spike in your credit card balance, even if promptly paid in full, can result in a score decrease, prompting you to maintain lower card balances to sustain a higher score.
Early Detection of Issues
Juggling numerous bills and accounts can be challenging, leading to the possibility of negative entries on your credit report due to inadvertent errors. Whether it’s a missed payment or an overlooked negative bank account balance sent to collections, regular credit report check-ups enable you to identify these issues promptly. In certain instances, reaching out to the lender or collection agency, providing an explanation for your situation, and making immediate payments may facilitate the removal of such items from your report.
Detection of Fraudulent Activity and Errors
Beyond authentic negative entries, credit monitoring serves as a safeguard against potentially inaccurate or fraudulent information. Identifying such discrepancies early allows for swift action, making it easier to dispute and ultimately remove such discrepancies.
Beneficial Features of Credit Monitoring Services
Certain credit monitoring services provide additional features that can positively impact your credit. Take, for example, Experian Boost, a service enabling the inclusion of on-time payments for utilities, phone bills, and even streaming services in your Experian credit file. By linking your financial accounts, Experian identifies eligible payments for inclusion, omitting any late payments to prevent negative impacts on your credit score. According to the credit bureau, participants in the program experience an average FICO score increase of 12 points.
Utilize Credit Monitoring to Enhance Your Financial Standing
The process of monitoring your credit is not time-consuming. In certain instances, the service may provide regular updates, eliminating the need for daily or weekly log-ins. Despite the minimal effort required, consistently checking your credit score and reports can significantly influence your financial strategy.
Over time, credit monitoring contributes to a comprehensive understanding of how your financial decisions influence your credit score and equips you with the knowledge to address issues promptly. Furthermore, it aids in the maintenance of a positive credit standing once established.