We all make it a point to keep track of the balance within our bank accounts and to ensure that we have enough funds to pay monthly bills.  Unfortunately, this is not always the case in regards to credit scores.  The simple fact of the matter is that credit scores can impact our sense of financial freedom and therefore, our very existence.  This is also why it is quite ironic that some individuals fail to keep themselves abreast of their current ratings.  In order to better appreciate how credit scores can affect our quality of life, it is first important to appreciate their purpose.  We can then list some of the reasons why regularly monitoring these figures is so critical. 

Free Credit Score Check

What Exactly is a Credit Score?

Imagine for a moment that a friend asked you for a bit of money.  What factors would your decision take into account?  Common answers will include how much will need to be borrowed, how long it will take the friend to repay the debt and how likely it is that he or she may fail to pay you back (known as “defaulting” in the credit industry).  These are the very same metrics which financial institutions employ. The single concept is referred to as a credit score.

Credit scores are employed by lending institutions in order to better determine how much of a risk the lender presents.  In other words, would it be worth it for them to lend you money or might you experience problems in terms of repayment?  In the Unite Kingdom, credit scores are calculated in a numerical range between 300 (poor) and 850 (excellent).  

Positive scores will provide you with much more latitude in regards to how much money you can borrow, the associated interest rates and the amount of time that can elapse before the balance needs to be settled in full.  There are four agencies which will ultimately determine your credit score:

  • Experian
  • Equifax
  • TransUnion
  • Crediva

Now that we have a basic understanding of the principles associated with credit scores, why is it a good idea to keep track of their value on a regular basis?

What are the Benefits of Keeping Abreast of Your Credit Score?

Would you wait to schedule an appointment with your dentist until a root canal was warranted?  Is it logical to ignore a problem with your vehicle until it conglomerates to the point when major repairs are required?  These very same questions can be used to illustrate the importance of regularly monitoring your credit score.  

The fact of the matter is that these ratings can change on a relatively frequent basis; particularly if you purchase goods and services with a debit or credit card.  Scores can therefore increase or decrease within months or even weeks.  In order to better appreciate where you stand, it is wise to take a more proactive stance. 

What About Debts and Loans?

The term “out of sight, out of mind” can sometimes be used to describe poor credit scores.  To put it simply, some of us do not wish to see how far our fiscal flexibility has fallen.  This is akin to ignoring a toothache in the hopes that it will somehow resolve itself.  Poor credit ratings tend to be associated with mounting levels of debt and increasingly crippling loans.  Knowing where you currently stand is the best way to understand what actions (if any) need to be taken. 

Furthermore, we need to highlight the fact that a low credit rating tends to hurt other areas of your life.  It will be much more difficult to be approved for any type of loan and there are even times when the interest rates associated with a debt will increase to the point where they are nearly impossible to redress.  This is why it is always better to fully appreciate where you currently stand; regardless of how much the reality may be difficult to accept.

Starting Down the Road to Recovery

A final reason to check your credit score involves what can be done to improve this rating.  Assuming that you are laden with significant amounts of debt, there are always options to consolidate your payments into a single lump sum.  This will take much of the guesswork out of the equation while also enabling your score to improve over time (once your financial obligations have been fulfilled).  

Credit scores should never be taken lightly.  As we can see, it is much wiser to remain up to date with your rating in order to avert any issues that might cause even more stress and frustration.  Above all, make it a point to consult with a professional if you feel that you are in need of additional assistance.