About 20% of Americans said they would give up alcohol for a credit score of 800.
Many Americans understand that their credit score is extremely vital to their financial lives. However, a majority don’t know what goes into it.
According to a new study by CompareCards, 61% of Americans did not know that their payment history is the main factor that affects their credit score. Your payment score accounts for 35% of your overall score.
Generation X and millennials were less likely to know the right answer compared to the older generation.
The study further reveals the other common misconceptions that Americans have about their credit scores. For example, over 40% of Americans incorrectly thought that checking your credit score too often can damage it.
Most people interviewed also indicated that being debt-free shows that you have a good credit score. This is a misconception. Your debt level affects your credit report, but it comes second to your payment history. If you clear your debt after having a bad score, it can take several years for your credit score to rebound. If you are debt-free because of bankruptcy, the bankruptcy will weigh negatively on your score.
The Benefits of Using a Credit Monitoring Company
Over 72% of the study respondents also indicated that you only need to check your credit score when you are applying for a loan. That is a serious misconception. You need to monitor your credit history periodically throughout the year to verify your credit health.
Monitoring your credit score lets you confirm that you are managing your credit well. To make matters easy, it is highly advisable to use a credit monitoring service.
The benefits of using a credit monitoring company include:
- Preventing Identity Theft
Identity theft is a common occurrence. It might not look like a big deal until you become a victim and your credit score is ruined forever.
The longer a fraudster gets away with it, the worse your credit score will get. It can take over 2 months to establish that your credit is due because credit bureaus usually report late payments 60 days past the due date.
In the worst-case scenario, your debt can be passed to a collection agency and you can be sued by lenders. This will cost you over 100 points deduction from your score.
The damage can be repairable but it will take time and stress to fix your score.
With a credit monitoring company, you are notified immediately if someone is using your credit card. Therefore, you will be able to act quickly and prevent further damage.
- Better Financial Decisions
A credit monitoring company will provide you with valuable insights about changes to your credit score. This will help you to make better financial decisions.
- Customizable Alerts
As a customer of a credit monitoring company, you get to tailor what alerts, notifications, and reports that are sent to you. You can choose to get notifications every time there is a suspicious transaction on your credit card.
Top 10 Credit Monitoring Companies
- Beacon Management Services San Diego
- Privacy Guard
- Identity Guard
- Identity Force
- Credit Karma
- Transunion Credit Monitoring
- Experian IdentityWorks
- Mint Credit Monitoring
Having a healthy credit score is important to your overall financial health. Your score can be negatively affected by several factors including irresponsible spending and identify theft. You need to keep track of your credit score. You can do that yourself. However, working with a credit monitoring company makes things much easier.