Why Is It Important to Track Your Credit Score?

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Tracking your credit score is one of the most important financial diagnostic tools you can use. You can think of your credit score like a thermometer. Much like a thermometer measures your physical health, a credit score measures your financial health and your creditworthiness. And just like a thermometer, your credit score can’t diagnose your problem — but it can tell you that there is a problem.

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Why tracking your credit score matters

You might pay more for new credit – Over the past decade, lenders have started to use credit scores as a tool to not only determine whether a customer is creditworthy, but also to determine how much interest that customer should pay. Lower scores present more risk to the bank, so they pass that risk right back to you in the form of a higher rate on home and car loans, credit cards and personal loans.

You might pay more on the credit you already have – Even if you don’t need new credit, your credit score can still impact your existing credit. Many of your existing creditors are tracking your credit score. When your score drops, it is an indication to your creditors that you are not as financially stable as you were when you were originally approved for that loan. This change maybe be reflected in variable interest rates you are paying on your loans.

You might pay more for insurance – Insurance companies are also using credit scores to determine your level of risk, and in turn will charge you more. Many states allow credit scores to be used as a factor in determining premiums because credit scores can be linked to increased claims.

You may be denied a job – Did you know that over 60% of employers are checking credit before they hire an employee. Having a poor credit history can prevent you from getting that dream job.

Credit will impact where you live – Looking to rent an apartment? Be aware that most rental companies and landlords require a credit score check along with income verification and other financial documents that indicate your financial responsibility.

Large drops in your score are a red flag – your credit score is going to change from month to month, but what you need to watch out for are large changes in your score, particularly to the downside. Large drops in your score are a red flag that something negative has happened on your credit file. You need to get a copy of your credit report to determine exactly what the issue is.

Monitor for fraud – Identity theft is a huge problem these days. Monitoring your credit score can alert you to problems that could be a result of identity theft.
Achieve your personal and financial goals – Certain personal and financial goals, like buying a car or a first home, are tied to your credit history and score. If you don’t know your score, you have less of a chance of achieving that goal. Knowing you score can help you get there.

Set a goal for your credit score – A good credit score can save you money, so why not set goals for you credit score? There are many common-sense steps that you can take to improve your credit score, but in order to know if they are working, monitor your score over time.

Be sure to read our “How to Improve Your Credit Score” article to find great tips on improving your credit score, as well as things that may have a negative impact on your credit.

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You can keep track of your credit report and score with CreditSesame.com. Get your truly free credit score monthly – no credit card required, or trial periods. And, find out how much you can save with refinance, low interest credit or loan option with Credit Sesame’s debt analysis tools.

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