Checking your credit score at strategic times in the new year can help you improve your finances and make positive money moves.
The golden rule of thumb for checking credit is three times a year. That’s how many free checks you get through the major credit bureaus. But you might be able to access additional peeks into your file at no cost through your bank and certain third-party websites.
Why would you want to do that? You should keep a closer eye on your score if you deal with any of the financial tasks below.
Borrowing Money
When you apply for a loan with a legitimate financial institution, they’ll check your credit. They perform this check to assess your creditworthiness, and what they see may affect your approval and loan size, terms, or rates.
Checking your score before your lender does can help you streamline the borrowing process. You won’t waste time by applying for loans you have no hope to qualify for — instead, you can focus on loans that match your profile from the start.
Eligibility requirements should be posted on a lender’s website. But if you have any questions, you can call to apply, and a representative will walk you through the online loan application. This rep can clarify how your credit score may impact your approval, if it does at all.
Regardless of a lender’s policies, you should focus on bringing up your score before you borrow. Of course, you can’t always wait until you have an excellent score, so there are emergency loans available with bad credit.
Buying a Home
If this is the year you get a foot on the property ladder, you should know your score. Like your personal loan eligibility, mortgage approval may rest on your credit score.
Conventional mortgages typically require a score of 620 or above from borrowers. You may find exceptions for bad credit through government incentives and alternative brokerages. However, most financial advisors would recommend you put your real estate dreams on hold until you can get your score as high as possible.
Improving your score relies on some pretty basic financial hygiene — basics like paying bills on time and never carrying over a balance on lines of credit. Achieving these habits is easier when you have a decent income and a balanced budget.
Recovering from Fraud
Did all your swiping and tapping over the holidays expose you to fraud? Was your bank involved in a major data breach? You need to pay close attention to your banking statements and credit report this year.
A data breach doesn’t necessarily mean you will become a victim of fraud, but it increases your chances. You should regularly check in with your report to catch any payday loans or lines of credit you didn’t open.
If you see a purchase you didn’t make on your banking statements, get in touch with the card company to jumpstart the fraud process. You should also check your score to make sure they haven’t managed to do anything else with your financial profile. If you see errors or inaccuracies, reach out to the bureau that shows the mistake to dispute the issue.
The Takeaway:
Checking your score three times a year provides a good base for your financial security. But consider increasing these checks if you need to borrow money, buy a home, or recover from fraud this year.