In January, I got an unwelcome new year’s gift from my credit card company. My monthly minimum payment tripled as the interest-free grace period on my account expired. I promptly paid off the outstanding balance to avoid interest charges. Apart from staving off future interest costs, paying off the balance resulted in a few points increase in my credit score.
As you can infer from last week’s blog posting, I am an advocate of periodic financial check-ups. One element of the check-up should be an assessment of your credit standing. Recent government push towards greater transparency in lending has made this easier than ever. A growing number of credit card companies now offer their card members free access to their credit scores.
Keeping track of your credit score has several benefits:
- Helps you understand the factors that determine your score and the weight attached to each factor – on-time payments, age of oldest credit line, number of open accounts, number of recent enquiries, percentage utilization and available balance
- Reveals how your score stacks against other consumers
- Indicates how attractive your credit profile is from a potential lender’s viewpoint
An added feature offered by my card company is a credit score simulator. This allows the card user to assess the impact of a single action or combination of actions on their credit score. Using this tool, I discovered that maintaining my history of on-time payments for the next two years would not lead to a higher credit score. On the other hand, a 30-day lateness in paying on one account would cause a 50-point drop in my score!
Another feature worth checking out is credit alerts. Setting up credit alerts can help detect fraudulent charges, new accounts or addresses and any other factor that may point to identity theft.
To round out my credit monitoring activities for the first quarter, I will be taking advantage of the free annual credit report check available via annualcreditreport.com. Mandated by Federal law, consumers can gain access to their credit reports from Experian, TransUnion and Equifax once every year at no cost. Paired with year-round credit monitoring, this provides safeguards against identity theft.