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- Experian’s free credit score alerts have helped me better understand how my financial actions impact my credit score. Experian emails me when there’s been a change to my score, and shows me recent activity that might have caused the change.
- Since I started receiving these alerts, I’ve made an effort to keep my credit card balances lower, since amounts owed accounts for 30% of my FICO score.
- I’ve even started paying my credit cards twice each month because credit card issuers can report your balances to the credit bureaus at different points in the month.
- I also time my credit card applications more strategically to minimize the negative impact on my credit score, and I’ve started downgrading credit cards instead of canceling them outright to preserve my average age of accounts.
- See Business Insider’s list of the best rewards credit cards.
A couple of years ago, I signed up to get free credit score alerts from Experian. It’s one of the best things I could have done for my credit.
Being able to see in real time exactly how my actions are impacting my credit has helped me understand my credit score far better than simply reading about credit scores ever could. I’m also able to keep myself in check, and if an error ever shows up on my credit report, I’ll be able to catch it quickly.
When I get email alerts from Experian, the subject tells me that there’s been a change in my credit score, and the body tells me whether my credit score has increased or decreased. I can then click through to sign into my account and see how much my score has changed. After that, I can look at my credit summary to get a sense of any recent activity on my credit report that might have caused the change in my credit score.
Here are the three ways these alerts have changed the way I use credit cards and improved my credit score.
1. I’m better about keeping my balances low
It didn’t take long for me to realize that most of the time, when I received emails saying my credit score had decreased, it was right after I’d racked up a significant balance on one of my credit cards.
Your “amounts owed” makes up 30% of your FICO score, and is one of the most important factors — second only to payment history. This doesn’t mean that carrying any balance at all will cause a dip in your score, but using up too much of your available credit likely will.
Most credit gurus recommend keeping your debt-to-credit ratio below 30%, although consumers who have joined the 800 club (the maximum FICO score is 850) tend to keep theirs below 10%. This means that if you have a credit limit of $1,000, you want to keep your balance below $300 at all times.
Credit card companies don’t necessarily report your balances to the credit bureaus right after you’ve paid your credit card bill. They might report it in the middle of your statement cycle. This means that even though I was often paying off my balances in full each month before my credit card bill was due to avoid interest, my credit utilization was still high because it was being reported to the credit bureaus before my bill was due. I was sometimes running up balances of $5,000 on credit cards with a $8,000 limit.
Since I started getting credit score alerts, I’ve become a lot better about keeping my credit utilization low at all times. I pay off my credit cards twice each month, and I try to always keep my balances below 30% of my available credit. The good news is that this credit score factor is updated monthly, so its impact doesn’t linger on your credit report. If you have high balances this month but pay them off next month, you’ll likely see an immediate improvement to your score.
2. I time my credit card applications more strategically
Sometimes I’d get an alert saying my credit score decreased even though I hadn’t run up a balance on any of my cards. In those cases, I’d often check my credit summary and see a couple of recent inquiries.
I’m a bit of a credit card rewards junkie, so I apply for more cards than your average person. I tend to apply for two at once right before I have a major purchase to make so that I can get some sign-up bonuses, which require meeting a minimum spending requirement within the first three months.. Almost without fail, my credit score dips a bit after a round of credit card applications.
Luckily, the impact of new inquiries is minimal (“new credit” is responsible for 10% of your FICO score, and I usually only saw my score decrease by a few points). It’s also temporary. The impact tends to dissipate after a few months, it stops impacting your score after one year, and it falls off of your report entirely after two years.
When I open my Experian credit report, I’m able to see all of my recent inquiries, including the date they occurred and the date they’ll fall off of my report. When I’m interested in a new rewards credit card, I check my report to see how many new inquiries I still have on my report and if any are about to fall off. I try to keep my inquiries to less than two every six months and less than four every year.
3. I don’t close old credit cards anymore
I’ve closed a couple of credit cards since signing up for credit score alerts because I decided I wasn’t getting much out of them, and they charged an annual fee. I’ve also had a couple of credit cards closed on me for inactivity.
My credit score has dipped noticeably more than once after an account was closed. There are two possible reasons for this. One is that my credit utilization is going up because my available credit went down. The other possible reason, if it’s an older card, is that my average age of accounts went down. The “length of credit history” category makes up 15% of your FICO score.
I still get rid of credit cards I’m no longer using if they charge an annual fee, but first I check to see if it’s possible to downgrade the card to a no-annual-fee version instead of closing my account. If the card doesn’t have an annual fee, I make sure to leave it open and keep it active by putting one or two monthly bills on the card.