2024 Credit Resolution - The Importance of Checking Your FICO Scores and Credit Reports in the New Year
This will help you understand why reviewing your credit is so important, how your credit information can impact your financial life, and simple steps you can take to improve your credit if you're not happy with its current condition.
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The start of a new year can be a great time to set goals that could improve your life in the days ahead. Many people set resolutions to take better care of their health, spend time with family and friends, travel more, or to make wiser financial choices. Yet there's another key New Year's resolution that you should consider adding to your list—checking your credit.
Checking your FICO® Scores and your credit reports are smart habits to develop. The guide below will help you understand why reviewing your credit is so important, how your credit information can impact your financial life, and simple steps you can take to improve your credit if you're not happy with its current condition.
Why Checking Your Credit Reports Is Important
Your credit history has the potential to impact your life in many ways. Lenders, credit card issuers, and other companies often review your credit history to assess your risk as a potential customer when you apply for credit. As a result, negative information on your credit reports could make it difficult (sometimes impossible) to qualify for loans, credit cards, an apartment, or even to land certain jobs.
Because there are so many opportunities for your credit history to affect your financial life, it's important to know what others see when they review your credit reports. You can accomplish this goal with routine credit checks from all three credit bureaus.
Where to Check Your Credit Reports
Checking your credit reports is simple, fast, and free. You can visit AnnualCreditReport.com to request a free credit report from each of the three major credit bureaus— Equifax, TransUnion, and Experian.
You have the right to a free credit report from each credit bureau once every 12 months courtesy of the Fair Credit Reporting Act (FCRA). However, each credit bureau now gives consumers access to a free credit report as often as once a week as a courtesy.
Why Checking Your FICO® Scores Is Important
In addition to keeping tabs on your three credit reports, it's also essential to check your FICO® Scores on a consistent basis. . Ninety percent of top lenders use FICO Scores. So, if you apply for a loan, credit card, or other financing product, there's a good chance a lender will use a FICO Score not only to determine whether you qualify, but to set your interest rate and borrowing terms.
A good FICO® Score could save you thousands of dollars. Below is an example that illustrates the savings potential that a higher FICO Score could be worth if you were financing a $391,800, 30-year fixed rate mortgage. (Note: $391,800 was the median home price as of October 2023 according to the National Association of Realtors .)
| FICO® Score | APR Monthly | Payment | Total Interest Paid |
|---|---|---|---|
| 760-850 | 6.451% | $2,464 | $495,179 |
| 700-759 | 6.673% | $2,521 | $515,827 |
| 680-699 | 6.85% | $2,567 | $532,430 |
| 660-679 | 7.064% | $2,624 | $552,666 |
| 640-659 | 7.494% | $2,738 | $593,849 |
| 620-639 | 8.04% | $2,886 | $647,096 |
Source: myFICO Loan Savings Calculator
Consider the top row and the bottom row of the table above. The difference between an 8.04% and a 6.451% APR may not seem that drastic. Yet when you break down the numbers, you would pay an extra $422 per month for the mortgage above if you had a FICO® Score in the lowest range (620-639) versus the highest range (760-850). And the difference in total interest paid is even more pronounced. By working to earn the highest FICO Scores, you could save $151,917 in total interest charges in this example.
Where to Check Your FICO® Scores
There are numerous ways to access your FICO® Scores. One of the easiest ways to check your FICO scores is to visit myFICO.com. There's a free version that will give your FICO Score 8 and paid versions that offer more score versions. Additionally, your credit card issuer may offer access to your FICO Score as a benefit for cardholders.
Bottom Line
Checking your FICO® Scores and your credit reports more often is a wise habit to develop. When you monitor your credit, you're more likely to notice if errors or fraud occur. Plus, keeping a closer eye on your credit might be just the motivation you need to take other positive steps if there's room for improvement where your FICO Scores are concerned.
Get your FICO® Score from FICO, for free. No credit card required.
Michelle Black, Founder of CreditWriter.com is a leading credit expert, financial writer, and speaker with nearly two decades of experience. Her work has been featured with major outlets such as Forbes, Reader's Digest, and U.S. News and World Report.