You Should Check Your Credit Score: It May Have Gone Up

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Credit Sesame recommends that you check your credit score. There may be a pleasant surprise waiting for you.

Even if you’re afraid to look, it’s a good idea to check your credit score regularly. As of July 2022, a credit score check might provide some good news for millions of Americans.

A recent change to credit scoring is likely to have helped the credit scores of millions of consumers. It’s only natural that you should want to see if you were one of the lucky ones. Beyond that though, you should understand why your credit score went up, and what you can do to keep it going up.

Why you should check your credit score to see if it went up

As of July 1, 2022, certain types of medical debt has been removed from credit reports. The three credit bureaus (Equifax, Experian and TransUnion) that compile those reports agreed to the change in response to pressure from the Consumer Financial Protection Bureau (CFPB) and some politicians.

If you’ve had medical debt on your credit report, this change might boost your credit score. That’s especially true if you’ve been late in paying some of that debt.

Both the total amount of debt outstanding and late payments can hurt your credit score. If medical debt has been on your credit report, it may no longer be reported there.

That makes this a good time to check your credit score and your credit report. Checking your credit report will update you on what creditors will now see when they look at your debt and payment history. Checking your credit score will tell you what impact recent changes have had.

Besides the changes that went into effect on July 1, there are supposed to be further changes to how medical debt is reported starting early next year. In all, these changes are expected to remove 70% of medical debt from credit reports. That would account for about $60 billion in debt.

Why credit scoring is under review

Credit scores are an important tool for potential lenders and other businesses. Those scores don’t paint a complete picture of your financial situation, but they do say something about how much debt you have and how reliable you’ve been about making your payments.

Because many important decisions are based on credit scores, a big question around them is whether or not they are fair. Since lower-income people tend to have worse credit scores, some critics complain that they discriminate against the poor.

Medical debt is viewed by some as especially unfair. According to Rohit Chopra, Director of the CFPB, “In many ways, it’s hard to call medical debt a real debt. Few people choose to take on medical debt, and typically, patients have no idea how much they will be charged for a service or a procedure.”

Besides medical debt being something you don’t usually sign up for, there is often uncertainty between patients and their insurers as to who owes what. That means you may have debt counting against you on your credit report that isn’t really your responsibility.

The recent move to remove some forms of medical debt from credit reports should at least partially ease these problems.

What this credit score bump means – and what it doesn’t

A boost to your credit score can have direct financial benefits. It can help you get approved for credit, and may allow you to get a lower interest rate when you borrow.

As beneficial as that is, it’s important to recognize that removing medical debt from credit reports is not a miracle cure for financial problems.

Most importantly, removing that debt from your credit history does not mean you no longer owe any balances outstanding.

Also, this change may make your credit history look better, but it doesn’t actually improve your credit health. The debts you face and your ability to pay them remain unchanged. Taking on more debt now if you’ve been unable to pay your medical debt will just lead to further problems.

In short, the change in medical debt reporting changes the appearance of your credit status. You still have to deal with the underlying reality of debts, whether or not they are on your credit report.

Other ways of raising your credit score

The recent change in credit scoring might have given you a one-time bump in your credit score. Consider building on that by making some more sustainable moves to improve your credit.

Some examples are:

  • Consider whether debt consolidation might help organize your payments and/or make them more affordable.
  • Take a fresh look at the interest rates your credit cards are currently charging. Make sure you are using the most cost-effective ones for new charges, and look to see if there are any cheaper options on the market.
  • Rework your budget to leave more room for debt payments.
  • Pay more than the minimum payment on your monthly credit card bills. Paying down your card balances faster should help your credit score by lowering your debt utilization ratio. Plus, it will cost you less interest in the long run.
  • Be very selective about opening new credit accounts. Don’t just jump at every new offer. Opening too many credit accounts within a short time can hurt your credit score.
  • Review your credit report for accuracy. Make sure any incorrect or outdated information is removed from the report.
  • Each of the three credit bureaus may be reporting different information about you. It’s a good idea to check reports from each of the three every now and then, to make sure all are accurate.

Good financial news has been hard to come by in an economy featuring high inflation, rising interest rates and concern about a recession. The recent change in credit reporting might have provided you with some good news about your credit score. If you had medical debt and it has been removed, now is a good time to check your credit score.

Now you should consider building on that. There are positive credit moves you can make so good news about your credit score becomes more than a one-time thing.

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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.

Richard Barrington
Financial analyst for Credit Sesame, Richard Barrington earned his Chartered Financial Analyst designation and worked for over thirty years in the financial industry. He graduated from St. John Fisher College and joined Manning & Napier Advisors. He worked his way up to become head of marketing and client service, an owner of the firm and a member of its governing executive committee. He left the investment business in 2006 to become a financial analyst and commentator with a focus on the impact of the economy on personal finances. In that role he has appeared on Fox Business News and NPR, and has been quoted by the Wall Street Journal, the New York Times, USA Today, CNBC and many other publications.

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