A quick browse through many financial websites and you will be sure to find tips on improving your credit score. While it is important to have a good credit score so that you get the lowest interest possible, I question the obsessiveness that many place on their credit score.
Photo Courtesy Andres Rueda
Why Do you Need a Good Credit Score?
Think about it this way: why do you need a good credit score? The answer is to get the lowest interest rate possible. From there, the next question should be: how often are you financing things? For most of us, the answer should be not often. Sure you may use your credit card each month, but hopefully you pay your balance off in full each month. Therefore, the interest rate has no bearing on you. It could be 5% or 100%. Either way, you don’t pay it if the balance is paid off each month.
When most people use financing is for cars and houses. If this is true for you, how often are you buying houses and cars? A new car is probably every ten years. And then even then, many suggest you should pay cash for a car. You might buy a house then need to upgrade in seven to ten years. After that, you should be fairly stable with where you are living. However, with the incredibly low mortgages rates, you probably refinanced at least once since you purchased your house.
So then why obsess over your credit score if it only factors into play every ten years?
Credit Score Management
I am not telling you to completely ignore your credit score, but I am saying to stop worrying how much it rose/fell this month. If you are smart with your money, as in not charging too much and are never late with a payment, your score should increase over time. Remember, these two factors along with length of time make up a good portion of your credit score. As long as you are doing these things, your credit score should be fine.
I highly recommend ordering your free credit report each year from the government. In fact, I get my free report three times per year.A quick review is all you need to do to spot any errors or irregularities in your report. If that checks out, then there is no need to worry. If you do find mistakes, then you need to take action to correct these errors as they can impact your score.
When You Should Care
When it comes to time to move or buy a new car, order your credit score six months ahead of time to see what it is. This way you will have a sense of what it is going in. If the car dealer claims you have a lower credit score than you thought, ask to see it. Some unscrupulous dealers will just tell you that you have a lower score so that they can charge you a higher interest rate. This is illegal and you have a right to see the score they pulled.
Overall, there is no need to constantly be checking and reviewing your credit score since it doesn’t come into play that frequently. As long as you are smart with your credit, your score should be fine. By taking the extra step of reviewing your credit report on a regular basis as well, you can rest assured that you will have good credit and will get a favorable interest rate. If you are really curious about your credit score, you don’t need to pay to see it, you can use a free option like Credit Sesame or Credit Karma.
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