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Do you know your credit score?
Better question: Are you sick of hearing us tell you over and over how important it is to check your credit report and know your credit score?
It may seem like we’re beating a dead horse, but the truth is, you can’t ball on a 450 credit score, and we’re committed to putting more money in your pocket so that you can be the baller you’re meant to be.
A survey released by the Consumer Federation of America and VantageScore suggests the advice is working. The percentage of respondents who said they’ve obtained their credit scores in the past year rose from 49% in 2014 to 57% in 2018.
Credit expert Farnoosh Torabi, who hosts the “So Money” podcast, says she isn’t surprised.
“There’s been momentum building ever since the recession,” she told The Penny Hoarder.
News coverage of rising interest rates impacts lending, which trickles down into people’s credit lives and wallets.
Another aspect fueling the rise is easy access to credit scores.
“I’ve been covering personal finance for all of my career, and back in the late ’90s and early 2000s, there was no go-to place to get your credit score as a consumer,” Torabi said. “But now, there are more ways to access it.”
Great, You Know Your Credit Score. Now What?
Knowing your credit score is nice and all, but it means very little if you don’t do anything about it.
But you all are doing something about it.
The number of people who’ve checked their credit score has increased, and so has the number of people taking steps to increase their scores, according to year-over-year findings from Chase Slate’s 2017 credit outlook survey.
These steps include paying off debt, keeping credit usage low and making an effort to pay down credit statements in full.
We can all agree it’s easier to take the initial steps to improve your finances when you know what’s going on and exactly what you need to do.
A Lot of People Are Still Confused About Credit
The Consumer Federation study showed large majorities could correctly identify three key factors used to calculate credit scores:
- Missed payments, 86%
- High credit card balances, 81%
- Personal bankruptcy, 79%
But significant minorities incorrectly thought that age (41%) and marital status (38%) are used in this calculation.
“Some people think the older they are, the better their credit score will be,” Torabi said. “I think they confuse that with the length of their credit history.”
A lot of people also incorrectly believed tax liens (64%), medical collection accounts less than 6 months old (62%) and civil judgments (63%) are used to compute credit scores.
Most people knew steps to take to improve your credit score, but little more than half (56%) knew all of them.
Here’s Why Credit Scores Are So Important
“Largely we think of credit scores and their ties to qualifying for homes, loans and credit cards, but there’s other stuff, too,” Torabi said. “I think if [people] knew the extent to which [their] credit score actually makes an impact, it would make people more interested to see what their credit score is, and learn how to improve it.”
When you sign up for cable plans or insurance, providers will often do a credit check to make sure you’re paying your other bills on time. And if you’re renting, landlords and property managers will also run a credit check and review your credit score.
But the biggest reason to know your score has nothing to do with what you want to do in the future. It’s all about what you’ve done — or rather, haven’t done — in the past.
Credit reporting mistakes and identity theft are common occurrences, and they’re not going away anytime soon.
So even if you’re not planning on buying a house, financing a car, or opening a credit card in the near future, it’s still super important to know your credit score and monitor your credit report.
At The Penny Hoarder, we publish no shortage of articles telling you why you should check your credit score, how to improve your credit score and how amazing life has gotten since so-and-so raised their credit score.
Maintaining healthy credit is just like maintaining a healthy body.
“If you’re trying to stay healthy in your physical life, you should get on that scale and face that number, as hard as it can be,” Torabi said. “Numbers don’t lie. [Your credit score] will give you the honest truth, and from there, you can improve.”
Jen Smith is a staff writer at The Penny Hoarder. She gives money saving and debt payoff tips on Instagram at @savingwithspunk.
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