4 things to look for on your credit report

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Many consumers have never even looked at their credit report. But in fact, as a rule of thumb, it’s a good idea to review yours a few times a year.

Normally, you are entitled to a 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 until April due to the pandemic. If you haven’t reviewed your credit report yet, or it’s been a while since you read yours, here are four important factors to watch out for.

1. The combination of accounts you have opened

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 of credit cards and installment loans (like a mortgage or car loan).

Now, that doesn’t mean that if you only have open credit card accounts you should run out and get a car loan if you don’t need it. But what you should try to do in this case is work on improving other aspects of your credit image, like maintaining a solid payment history by submitting all of your bills on time.

2. The average duration of your open accounts

Another important factor in determining your credit score is the length of your credit history. Keeping long standing accounts open is good for your credit, so when reviewing your credit report, pay attention to the age of these accounts. If you see that most of your accounts are newer, but you have a seldom-used credit card that you’ve opened for over a decade, this might give you an incentive to keep that card if you previously consider canceling it. .

3. The amount of revolving credit you are using

A revolving line of credit is a line that renews itself as debts are repaid. 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 have the flexibility to spend more.

But having too high a credit card balance on all of your cards can result in a higher credit utilization rate. 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 that you should really do your best to start paying off some of those balances to prevent your credit score from being hit.

4. Accounts you don’t recognize

It is possible for a criminal to open a credit card in your name and accumulate charges against it or take out a loan in your name, run away with the proceeds and not repay that loan. All of this could negatively affect your credit score. Therefore, when reading your credit report, be sure to recognize each open account listed. And if there are any accounts you’re unfamiliar with, do some research.

Examining your credit report could help you maintain or build great credit and protect you from the impact of financial fraud. You don’t necessarily need to review your credit report every week, but it’s definitely worth taking a look at it three times a year.

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