Monitoring Credit

By Chelle Cordero

January 13, 2014 5 min read

In today's economic environment, it's not unusual for many of us to find ourselves in need of loans, debt management, sound financial advice and help with planning for our future. Unfortunately, many people who apply for loans find themselves unaware of their credit score and how it can affect the money they pay or if they qualify for a loan. There will never be a better time to improve your credit score and increase your attractiveness to potential lenders and employers.

According to John Ulzheimer, credit expert at CreditSesame.com, "a credit score is a numeric summary of the information on your credit reports. Credit scores normally range from 300 to 850 with a higher score being beneficial to the consumer. Credit scores are used by lenders, insurance companies, utility providers and landlords as a way to gauge the risk of doing business with an applicant. The most common 'brands' of credit scores are the FICO score and the VantageScore credit score. Billions of credit scores are sold by the credit bureaus each year."

A credit report contains all actions, negative and positive, of your loan and debt payments, credit card use, inquiries into your credit history, debt balances and available credit. Independent companies, such as Fair, Isaac and Company and its FICO score, distribute their own credit score based on their proprietary model that takes into consideration credit reports from all three major credit bureaus. Credit Karma provides the TransRisk New Account Score, VantageScore and Auto Insurance Risk Score from TransUnion. The data in your credit report is interpreted through an intricate numerical process to arrive at your credit score.

"The most actionable way to improve your credit scores is the pay down/off credit card debt, and there really isn't a close second option," Ulzheimer explained. "The amount of credit card debt on your credit reports relative to your credit limits is a very influence factor in your credit scores. That ratio, commonly referred to as the debt-to-limit ratio, can be the difference between a good score and a poor score. If you're able to pay down credit card debt and lower that ratio you'd be well on your way to improving your credit scores."

Companies such as CreditKarma.com and CreditSesame.com do not collect your data nor do they decide on your score; instead these companies facilitate getting the credit score reports into your hands -- for free -- so that you have the information necessary to determine what actions are necessary to ensure your financial well-being. Once you have your score, these companies can then provide you with various services to recommend preferable interest rates and help improve your score, manage your debt and assist in negotiating payment terms.

Your Social Security number and other personal information will be needed to access your credit score. Privacy and security policies from each company promise to keep your information safe. It's still recommended that you check your credit score yearly as well as closely monitor your credit accounts. Industry experts commonly advise people to not trust offers that guarantee quick credit fixes, as they are usually less reputable.

John Ulzheimer understands customer concerns about supplying personal data and says, "Your information is always at risk, and the recent Target data breach is a great example of how even reputable companies can be hacked. Providing your name, address, date of birth and Social Security number to anyone or any company should be done only if you feel comfortable that your information is being protected, but even then it's never truly 100 percent safe. Reputable companies will use secure servers and will encrypt your data so that if they're breached the data is useless to the hackers."

He offered this advice, "It's wise to become more engaged with your credit reports and your credit card and debit card transactions so you can do your part to help identify fraudulent activity."

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