4 Things to Look for on Your Credit Report
Keep an eye out for these items the next time you review your credit report.
- Your credit report is a snapshot of your borrowing history and current borrowing record.
- It's important to review that report several times a year to preserve or build your credit score.
Many consumers have never so much as glanced at their credit report. But actually, as a general rule, it's a good idea to review yours several times a year.
Normally, you're entitled to one free copy of your credit report each year from each of the three major credit bureaus -- Experian, TransUnion, and Equifax. Right now, credit reports are available for free on a weekly basis through April due to the pandemic. If you've yet to review your credit report before, or if it's been some time since you gave yours a read, here are four important factors to look out for.
1. The mix of accounts you have open
If the only credit accounts you have in your name are credit cards, it could serve as a red flag the next time you apply for a loan or another credit card. Lenders and credit card issuers like to see a healthy mix that doesn't just consist of different credit cards but rather credit cards and installment loans (like a mortgage or auto loan).
Now, this isn't to say that if you only have open credit card accounts, you should run out and get a car loan if you don't need one. But what you should try to do in that case is work on improving other aspects of your credit picture, like maintaining a solid payment history by submitting all of your bills on time.
2. The average length of your open accounts
The length of your credit history is another big factor that goes into determining your credit score. Keeping long-standing accounts open is good for your credit, so when you're reviewing your credit report, pay attention to the age of those accounts. If you see that most of your accounts are newer, but you have one rarely used credit card you've had open for more than a decade, that might inspire you to keep that card around if you were previously considering canceling it.
3. The amount of revolving credit you're using
A revolving credit line is one that keeps getting refreshed as debts are paid off. Your credit cards are considered a source of revolving credit. You get a spending limit on each card, and as you pay off your balances, you get the option to spend more.
But carrying too high a credit card balance across all of your cards can result in a higher credit utilization ratio. And that, in turn, could damage your credit score.
As such, pay attention to what your credit card balances look like when you study your credit report and see what percentage of your total revolving credit limit they amount to. If you're above the 30% mark, it's a sign you should really do your best to start paying down some of those balances to avoid a hit to your credit score.
4. Accounts you don't recognize
It's possible for a criminal to open a credit card in your name and rack up charges against it or to take out a loan in your name, run away with the proceeds, and fail to pay that loan back. All of that could reflect negatively on your credit score, so when you read through your credit report, make sure you recognize every open account that's listed. And if there are accounts that aren't familiar to you, do some digging.
Reviewing your credit report could help you maintain or build great credit and protect yourself from the impact of financial fraud. You don't necessarily need to review your credit report on a weekly basis, but it certainly pays to give it a look three times a year.
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