Ever wonder about the answer to this question? I know I do. I spent 15 working years in personal and mortgage banking, and among other things, I learned well during that time how important a credit score can be.
When I was processing loan and mortgage applications, the very first thing we looked at was the credit score. One glance, and we had a pretty good idea about whether the customer would receive a “yes” or a “no” from the underwriting team.
I got to experience the joy that customers had when we could tell them they were approved for their dream home, and I got to see firsthand the sadness other customers experienced when they learned that they could not qualify for a home loan.
As such, I learned the importance of knowing and monitoring one’s credit score. Even now, as we work on our goal of paying off our debt and remaining debt free, my credit score is important to me. First, keeping track of my credit score and knowing what changes it helps me to have at least some idea that my identity hasn’t been hijacked. If I were to see a massive drop in my excellent credit score, it would raise a red flag. Even a mediocre drop might give me some indication that there is something up with my credit score, whether it be an error in reporting or some other problem.
While some things, like applying for a credit card or charging a semi-large amount on your credit card might change your score a little bit (provided you don’t bring that credit card balance near to the maximum), other things, like bankruptcy or a loan default can change your credit score dramatically.
If you already have a great credit score, the way to keep it great is to keep having a stable financial lifestyle. Don’t apply for lots of new loans or credit cards, and keep any carried over balances on credit cards well below the card limit. In other words, stay financially responsible.
If you don’t have a great credit score, and you’re looking to improve upon it, there are also things you can do to help your credit score to raise and remain stable. Some of these things include paying all payments on time, paying more than the minimum payment, and keeping balances well below the limit once you get them paid down.
If nothing else, a stable credit score that isn’t constantly changing will give you peace of mind. And, know that just because your score hasn’t changed, doesn’t mean something is wrong. It’s totally normal for a score not to change for several months.
Even if you’re committed to never borrowing another dime – and that’s a worthwhile goal – you’ll know that you can if you need to.
Here’s a video that Credit Karma put together for more information on the subject
This article was made possible by the fine folks at Credit Karma.