What Is the Best Way to Monitor and Improve Your Credit Score?

Your credit report is a record of your borrowing and payment history over the last seven years. You actually have three credit reports, issued by the three main credit bureaus: Experian, Equifax and TransUnion. Lenders report data to the credit bureaus. The credit bureaus use a complex formula to summarize this data in a single three-digit number. This is your credit score. When you want to take out a credit card, mortgage, phone contract or loan, the lender contacts the credit bureaus and requests your credit score. The higher your score, the more credit-worthy you are perceived to be. Staying on top of your credit report will help you manage your finances and avoid identity theft.

Instructions

Monitoring your credit report

1

Get a free copy of your three credit reports from https://www.annualcreditreport.com/cra/index.jsp. This is the only legitimate site authorized to issue reports on behalf of credit bureaus. The report will give you your credit history, but not your credit score.

2

Check your credit reports for errors. It can be something as small as a typo in your address or something big, like a loan you don't recall taking out. Minor errors can hurt your credit score. Major ones can be a sign of identity fraud.

3

Report any errors to the credit bureaus. They will investigate the source of the errors. You may be asked to provide evidence of your claim, such as a cancelled check.

4

Request your credit score directly from the credit bureaus. You can do this on their websites. You will have to pay between $10 and $20. The other option is to sign up for their monthly credit monitoring service. This lets you check your credit score any time you want. However, unless you really need to know your credit score at all times, it may not be not worth the $12 to $18 a month they charge.

5

Check your free credit reports at least once a year.

Raising your credit score

6

Make all of your credit card and loan payments on time. Late payments are one of the main causes of low credit scores.

7

Pay off as much debt as you can. If you make only the minimum payments on your accounts, you may stay in debt for years.

8

Avoid maxing out your credit cards. Lenders like to see a low debt-to-credit ratio.

9

Resist the urge to close all your credit cards once you've paid them off. Having one or two long-term cards will lengthen your credit history.

10

Avoid applying for several credit cards or loans in a short period of time. It makes you look desperate for money and lowers your credit score.