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How to Use Free Credit Monitoring to Boost Your Credit Score

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How do you boost your credit score? You’ve probably been told to pay your bills on time, keep debt levels low, and keep those older credit card accounts open.

That’s all good advice, but do you know if there are “derogatory marks” on your credit report? Do you know the average age of your accounts, and what you can do about it? Do you even know your current score?

You can get all of that information and more using a credit monitoring service. Here are three that are free and do not require a credit card number:

A review of these three services can help you choose the one that’s best for you. Once you’ve signed up you can use what you learn to take specific steps to improve your credit score.

Credit Karma is the basis for the explanations below, but most of the steps outlined will be the same if you use another free credit tracking/monitoring service.

How to Use Your Credit Report Information

Open your Credit Karma account and complete your profile. The service costs nothing and you’ll get emails every time something changes in your credit report.

You will have to give your social security number — there no way they can monitor your credit without it.

When you login you’ll see tabs across the top of the page. There are various useful resources there as well as a few links to promotional offers (they have to make money somehow).

Hover over “My Overview” (which should be the first tab from the left) and click “Score Details.”

The page that opens will say “Your TransUnion Score Details.” You can click a button near the upper right side of the page for “Your Equifax Score Details.”

Be sure to check the information from both of these credit bureaus (it’s not always the same).

At the top there is a nice chart/graph showing your credit score over the last eight months or so. You can immediately see if your score has been dropping or rising (but keep in mind that this is an estimated score).

Scrolling down you’ll six boxes, each with one of the following credit factors:

  1. Credit card use (high impact)
  2. Payment history (high impact)
  3. Derogatory marks (high impact)
  4. Credit age (medium impact)
  5. Total accounts (low impact)
  6. Hard inquiries (low impact)

Each of these boxes has a short summary as well as a link to click for more details. Let’s look at them one at a time.

1. Credit Card Use

This section covers your credit utilization ratio (although Credit Karma doesn’t call it that), which measures how much of your available credit you’re using.

I’ve written about this in detail in my post on how my score dropped 51 points and how you can quickly boost your credit score.

Lower is better (although it’s good to have some balances). Credit Karma shows my current ratio as 0% — a big part of why my estimated TransUnion score is 825 at the moment.

That’s up from 764 last year, when I was holding big balances on several credit cards  in order to take advantage of their zero-interest offers.

That 61-point increase shows the importance of credit utilization ratios.

MyFico.com says credit utilization determines 35% of your score. Others say it’s 30%, but in any case it’s right up there with your payment history in terms of importance.

You’ll notice that Credit Karma rounds off the percentages. I have $450 on my cards, which is less than 1% of my available credit, so it shows as 0%.

If you click “View Details,” you’ll see the total of your current balances and the total of all your credit limits. Furthermore, you can also see the ratio for each account, and that matters too. You want to keep each card’s utilization rate low.

You can read the post on how to quickly boost your credit score for in-depth advice on reducing your credit utilization ratio, but here are a few suggestions to get you started:

  • Spread purchases among your cards to keep a lower balance on each.
  • Get you limits increased to lower your ratio.
  • Pay cards off before balances are reported (more on this below).
  • Open new accounts to lower your total ratio.
  • Pay cash for purchases when your credit card balances are getting high.

2. Payment History

This is just what it sounds like, and it may be the most important factor in your credit score. Credit Karma shows a “100%” for my report, because I’m one of those freaks who have never paid anything late.

If you have made some late payments there are only a few things you can do to fix this part of your score, other than paying on time from now on. You can…

We’ll look at these steps in more detail in the next section….

3. Derogatory Marks

These are things like foreclosures, repossessions, and any accounts turned over to a collection agency. Credit Karma shows a nice “0” for my report. If you see anything higher than that, click “View Details” to take a look.

As with late payments, you have limited options for dealing with derogatory remarks. Once again, you can…

Most negative items on your credit report are dropped after seven years (bankruptcies remain for ten years). If you have a number of items near that 7-year mark, wait to apply for a mortgage or other loan.

You’re more likely to be approved when the negative items are gone, and you’ll get a better interest rate.

If you see anything that’s inaccurate, file a dispute with the credit reporting bureau where the item appears. If necessary dispute the item with all three credit bureaus which, fortunately, you can do online:

They’ll have up to 45 days to verify the disputed item and, if they can’t, it must be removed from the report.

As a practical matter this means even valid or half-valid items might be eliminated from your report just because verification isn’t completed in time.

Finally, the law allows you to add a 100-word explanation to your credit file if there is something you want to dispute.

This will not help your score, but it may help you obtain a loan in cases where a real human makes a decision.

4. Credit Age

Credit Karma says my “average age of open accounts” is 3.5 years, which is pretty bad. But I open a lot of credit card and bank accounts to earn bonuses, so this isn’t surprising.

When I click “View Details” I see that five of the accounts listed are less than 8 months old.

Fortunately (for me anyhow) credit age determines just 15% of your credit score. How can you use this information to raise your credit score? Here are two ways:

  • Keep your oldest credit cards, even if you don’t use them.
  • If you feel you have to close some accounts, close the newest ones.

Let’s say you have an old credit card with an annual fee you’d rather not pay. Instead of just canceling the card, see if it can be downgraded to a version that has no fee, which will usually have the same account number. I’ve done this several times.

If you don’t use the card, mark your calendar and pull it out once annually to charge something on it. That should prevent it from being closed due to inactivity.

Closing cards that you recently opened (as I frequently do just after getting a signup bonus) can increase the average age of your open accounts. However, closing any card can increase your credit utilization ratio, which may negatively impact your score.

If you just want to have fewer cards, close the ones that are newest and have the lowest limits.

5. Total Accounts

This section shows all of the accounts on your credit report, both open and closed. The number of accounts you have has almost no impact on your credit score. For example, one man has almost 1,500 credit cards and still maintains an almost perfect score.

There isn’t much you can do with this information, other than making sure it’s accurate.

6. Hard Inquiries

There are hard and soft credit inquiries, and only the hard ones affect your score. Credit card and checking account applications almost always involve a hard inquiry, otherwise known as a “hard pull.”

Credit Karma says this factor has a low impact on your score. While writing this article I applied for a credit card, and my Credit Karma account, which showed a new hard inquiry within a minute, registered a three-point drop in my TransUnion credit score (now 822).

I suppose that’s a low impact, and those inquiry-based drops bounce back pretty quickly, but that’s only part of the story. An important point they don’t mention is this:

Having too many hard inquiries on your credit report has a high impact on your ability to get new lines of credit.

I know this from experience. My applications have been declined by several credit card issuers because of too many inquiries, despite an 800+ score.

The good news is that hard inquiries stay on your report for only two years, and even while they’re there the impact diminishes as the months go by.

If you click “View Details,” you can look at the individual hard inquiries. This can be very useful because the dates are shown, so you’ll know when the two-year limit will be reached.

Consider the Chase 5/24 rule. Your credit card application will typically be denied by Chase if you’ve had five hard inquiries within two years.

Since you can check your hard inquiries to see when they’ll drop off your report, you can wait until you’re under five total you can apply for the card you want.

For example, My TransUnion information (via credit Karma) shows six hard inquiries, but two of them will hit the two-year mark and drop off the report within six weeks.

That will bring me down to four total, at which point I can apply for a Chase card to earn a big signup bonus.

So keep in mind that your credit score is not all that creditor look at. But it is important, so here’s how to use this information to boost or protect) it:

  • Don’t open new lines of credit too quickly.
  • Be sure you’ll get the card before you apply (or stick with pre-approved offers)
  • Check for and dispute any inaccurate items.

Yes, you can even dispute hard inquiries. I would file a dispute, for example, if a bank did a hard pull but didn’t tell me it was going to do so.

If you’ve boosted your score using information from a credit tracking service, tell us about it below… and keep on frugaling!

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