Credit Sesame discusses how to use credit monitoring to avoid unpleasant surprises.
Imagine if a work colleague lies about you behind your back. Perhaps dishing dirt on you to your boss, landlord, bank and people who do business with you. Would you like to know what they are saying? Better yet, would you like the chance to do something about it?
What if that work colleague is, in fact, your credit report? Your credit report is used by lenders, employers and landlords as a tool to assess your creditworthiness and financial standing. It contains information about how you have handled debt in the past. Does your credit report tell the story of someone responsible and reliable? Is the information accurate? Unless you check, you cannot know.
Using credit monitoring can give you insight into how others see your creditworthiness. It also means you can catch and correct any errors, hopefully before they impact your credit score.
You never know when someone may check your credit
Your credit report is a comprehensive summary of your past and ongoing use of credit. Normally, you can get one free credit report per year from each of the three major credit bureaus. However, because of the economic impact of the COVID pandemic, the credit bureaus are allowing consumers to get one free credit report each week until the end of 2023.
Few people are going to request a credit report every week. You may check your credit when you know it is about to be checked for a specific reason, like when you are about to apply for a new loan or credit card.
However, your credit may be checked more often than you think, for example:
- When you apply for a new job, a potential employer may check your credit report to see how financially responsible you are
- Insurance companies in many states use credit history as a factor in setting premiums, both when you apply and when your policy is up for renewal
- Credit card companies base their interest rates on your credit history, and may raise your rate for new purchases if your credit score drops
- Some landlords use credit checks to screen tenants to see how good they are at making their payments on time
You may not know when your credit history is going to matter. Even if you knew when it is about to happen, you do not have time to do anything about errors. Credit monitoring is a longer-term strategy for ensuring information is accurate.
Many factors affect your credit score
You probably know that if you start missing payments, your credit score may drop. You credit score can change for other reasons.
- Carrying a high credit card balance
- Paying off a loan
- Closing an old credit card account
- Applying for new credit
- Opening new credit accounts
- Fraudulent activity
Fluctuations in credit scores are normal and often minor. Still, you risk having a significant change happen at the wrong time if there is a change in credit behavior or fraudulent activity on your account. This is where credit monitoring comes in.
What is credit monitoring?
Credit monitoring is a service designed to let you keep a close eye on your credit record without continually requesting credit reports.
Credit Sesame offers free credit monitoring that allows you to:
- Easily check your credit score
- See how much you owe on your credit accounts
- View your payment history
- Understand how much of your available credit is in use
- Help you compare the interest rates you’re being charged on various accounts
- Get timely alerts to changes in your credit status
Free credit monitoring from Credit Sesame includes a monthly report on your credit, plus alerts whenever there is a change in your credit status. The report contains the information others may use to decide your lending capacity or responsibility in financial matters. You can use the information to manage your credit more efficiently.
Use credit monitoring because …
You are more than your credit score
Monitoring your credit score can be useful. But you are more than your credit score. Credit monitoring helps you understand what’s good or bad about your credit behavior. In turn, that allows you to figure out what you can do to improve your credit score.
It gives you time to work on your credit
There are several actions you can take to improve your credit. These include clearing up mistakes on your credit report, getting current on payments, and lowering your credit utilization ratio.
Each of these tactics may take time. If you wait to check your credit just before applying for something, you may find a problem you don’t have time to address.
Credit monitoring helps you stay informed about your credit at all times. You can address problems as soon as they occur. This increases your chances of having your credit in good shape when needed.
It helps you spot unauthorized activity in your accounts
Most credit card theft involves the theft of credit card information rather than someone stealing your actual credit card.
There are many ways for thieves to get your card information without you knowing it. Credit monitoring can help you spot suspicious increases in your account balances sooner to limit the damage to your credit score.
It alerts you to unauthorized new accounts
Another way thieves can use your credit is to open a phony account in your name. This can make you liable for charges on that account, plus ruin your credit. Just opening the account may cause a hit to your credit score. As the account balance rises, your score may continue to decrease. Finally, your credit score could take an even more serious hit if account payments are missed.
You may be able to head off a lot of this trouble with credit monitoring. Receiving an alert whenever a new account is opened in your name allows you to freeze the account immediately.
We monitor our physical assets with doorbell cams, burglar alarms, computer protection software or a good old family dog. Perhaps now is a good time to help secure your credit data by adding a credit monitoring service.
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Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.