At some point in time or another, most of us have been obsessed with looking at our credit score. Thanks to Credit Karma or monthly score tracking courtesy of our credit cards, keeping tabs on our credit scores is easier than ever. While I do think knowing your credit score at all times is beneficial, I don’t think it’s as important as people make it out to be.
In fact, there are more important factors to be aware of when monitoring your credit. I’m walking you through 6 things to remember when tracking your credit score. Don’t get so hooked on the number that you forget about these things!
6 Things to Remember When Tracking Your Credit Score
#1 – There are a variety of credit scores
Ever wonder why your score varies depending on where you pull it? That’s because there are nearly 30 different formulas that can be used to calculate your credit score. What does this mean to you? There really isn’t one set score you can constantly bank on.
If you’re looking for the best credit score number to leverage, I suggest using one that comes directly from one of the three credit bureaus – Experian, Equifax and TransUnion. In fact, when applying for credit, lenders generally take the middle of these three scores.
Want to track all your credit scores? Then, I’d recommend Credit.com’s ExtraCredit feature. It does have a monthly cost, but you get all the credit scores and additional benefits. You can read more about them in the article How to Take Monitoring Your Credit to the Next Level.
#2 – What’s on your credit report is more important than your score
Your credit score is an indication of what’s on your credit report. Don’t like the score you have? Go directly to the source! Review your credit reports and determine what could be impacting your score. If you have late payments, collection accounts or too much debt, your score could be hurting as a result.
If there are any inaccuracies on your credit report, you should prioritize getting those removed or updated. Read How to Fix a Faulty Credit Report for some guidance. While it does take some time, it’s something that anyone can pursue on their own.
#3 – Delays are common when calculating your credit scores
Did you know that late payments are only reported to the credit bureaus when the payment is 30 days past due? That means there will be a lag between your late payment and when it hits the credit report – ultimately delaying your credit score update.
The same applies for payments, payoffs and new credit inquiries. All credit activity is not instantly updated on your score, because the activity isn’t instantly updated on your credit report. Companies like CreditKarma, FICO and more may be able to give you an idea of what your score could be, but until it hits your credit report, you won’t know for sure.
#4 – The best thing you can do for your score is pay all your credit cards down to $0
As I mentioned before, if you don’t like your credit score, fix what’s on your credit report. If you don’t have late payments, just a lot of debt, the best thing you can do for your score is pay all of your balances down to zero. I know that the 30% usage is a common target, but that’s only AFTER you’ve paid off all your debt.
If you want to see a spike in your credit score, pay all of your credit cards down to $0. From there, make sure you have your credit report time to accurately reflect the zero balances. Once that happens, you’ll see your credit score go up drastically. I’ve experienced this multiple times – because I’ve been in and out of debt multiple times!
#5 – Cash beats credit any day
It may seem cool to have a high credit score, but the reality is this: the ability to pay cash for anything without using credit is much cooler. Don’t get so fixated on a high credit score that you lose sight of the ultimate rule “Cash is King.” The ability to not need or take out debt undoubtedly beats taking it out.
However, if you do need to take out debt (for a car or mortgage), then having a high credit score can work to your advantage. The higher your score, the more credit worthy you are. The more credit worthy you are, the less you’ll be charged in interest!
#6 – Sometimes your score must go down to go up
Because of delays, multiple scoring calculations and multiple scores, sometimes you may think your score should be going up and then it does the opposite. Don’t worry! Know that it will correct itself with time. A watched pot never boils!
It’s okay to track your score and stay on top of it, but don’t let monitoring it cause you anxiety or worry. Do the right things with your payments (i.e. pay on time, pay your debt off) and you’ll see the positive impacts to your score. They may not be instant, but I promise they will come!
Monitoring your credit can become addicting, so make sure you’re always keeping the six things above in mind. More important things exist than having a high credit score, so don’t put too much of your worth on having a good score. Working towards improvement and growth is what really matters! Did you learn anything new with today’s article? Share your questions in the Comments section below!
