Most people know that a lot is riding on their credit report and their credit score, from the interest rates they pay on loans, to their ability to rent an apartment, buy a home or car, and even to find a job.
Companies increasingly use credit scores as an objective measure of not only your credit, but your credibility.
So, it’s critical that every consumer understand his credit score and keep it as high as possible. It can mean thousands of dollars to your bottom line.
But, there’s still a lot of confusion out there about credit scores.
When is free not really free?
The first thing to understand is that you don’t have to pay to see your credit score. Unfortunately, companies have figured out a way to get people to pay for the service. While they often advertise the word “free” as part of their name, their real goal is to get you to sign up for expensive monthly subscription plans that allow you to monitor your credit score.
People often confuse a credit report with a credit score. A credit report contains all the information in a person’s credit file maintained by a Credit Bureau. The data in a credit report is interpreted through a complex mathematical process to determine a credit score, which is a three-digit number that commonly ranges from 300 (terrible) to 850 (perfect). You should monitor both your score and your report.
People also incorrectly assume that checking your credit score lowers it—this is partly true. When applying for a loan or another open line of credit, creditors check your score to see if you are a viable candidate. This can penalize you and impact your score. However, inquires made by you are not shown to creditors and will not lower your score.
Knowing the score
It’s essential to know what your credit score is. That’s because it can change at any time and can have huge impact on your life.
Your credit score can be damaged by not paying your bills or making delinquent payments. Often though, companies will report incorrect information about your payment history, and your credit score will be affected. You can correct these errors, but only if you spot them by checking your credit regularly. In addition, according to law enforcement, monitoring your credit score is one of the best ways to prevent identity theft.
How to take charge of your credit score
Credit Karma is a completely free service dedicated to empowering consumers to more actively manage their credit and financial health. The service helps you track your debt and finances by giving you instant access to your credit score, and finding you the best savings options for your credit cards, mortgage, auto loans, and more.
You can log into your account as often as you like to quickly and easily track your credit score, credit attributes, and debt–all from a single source. The free interactive tools show you how to anticipate changes in your credit score and compare your credit report to others to see how each item on your credit report affects your overall credit score.
With Credit Karma, you control who receives your financial data, and they never share your information without your explicit consent. They also follow all of the latest data security precautions.
So, how does Credit Karma offer all this for free when other companies charge $15, $25, or more per month? It’s simple. They work with financial service companies who want to advertise to people intent on improving and protecting their credit scores – the very people that Credit Karma attracts. When you log in, Credit Karma displays personalized offers from these companies.