In your daily life, as you work, eat, sleep, and fill the time, your credit score is effectively meaningless. That’s not to say that it doesn’t matter or that you shouldn’t care about the state of your particular three digit number. It’s just that the moments of your life where your actions impact your credit score (and vice versa) are a fairly small slice of the pie.
As access to our credit scores (and remember, you have many) increases, it can be tempting to check in regularly – perhaps weekly, maybe even daily. And if you want to obsess over your score, that’s totally your choice. But it’s important to remember two fundamental truths about your credit score:
- If you use credit wisely and continually make good on all your credit obligations, your score will inevitably reflect that.
- In fact, that’s pretty much all your score says about you. It’s not a reflection of your worth, it’s just a progress report that turns 7 years’ worth of credit data into numerical shorthand.
In other words, good credit is a marathon, not a sprint, and your score right this minute only really matters in a few specific instances. So while it never hurts to know where you stand, here are three moments when knowing your credit score really matters, and three times when it doesn’t help at all.
When to Check Your Credit Score
3-6 months before making a major purchase
If you’re gearing up to buy a house, a car, or some other big ticket item that’s going to need to be financed, you’ll want your credit to be as strong as you can get it. The higher your score, the more likely it is that you’ll be eligible for a low interest rate. That’s because many lenders view your credit score as an indication of your riskiness as a borrower. The riskier it is to lend you money, the more lenders will seek to offset that risk with higher fees and steeper interest rates.
The trick is that good credit doesn’t happen overnight. Building a strong credit history – and, consequently, a strong credit score – takes time. Even the act of finding and correcting mistakes on your credit report can take time.
So if you know that you’ll be applying for a loan or another form of credit, you’ll want to see your score in advance to know where you stand. The more time you give yourself, the more you’ll be able to do to strengthen your credit profile, including:
- Paying down debts to reduce your credit utilization ratio
- Repaying or settling outstanding collection debts
- Correcting any credit reporting errors
1-2 months after a financial setback
It’s cruel, but true: great credit takes years to build, but only one or two mistakes to undo. And many times it’s not even a mistake. Things happen (including global pandemics) and you have to make tough choices with your limited resources, which may include skipping payments on one or more bills.
It’s helpful to assess the damage, but only after the setback is over. If you’re in a position where you can’t afford to pay your credit card bills, there’s no point in tracking your credit score. When things are stable, however, and you feel confident in your ability to manage your debts, that’s when you should check your score and see where you stand.
It may be painful to see your score take a massive tumble, but it’s important to know that recovery is always possible. Negative marks mean less and less over time, so just focus on being consistent, living within your means, and making daily progress. The rest will work itself out.
Twice a year as part of a bi-annual financial check-up
As noted earlier, building good credit is a long process. If you’ve got the fundamentals down (make payments on time, don’t max out your cards, maintain accounts over a long period of time, etc.) your score should keep climbing.
So while you don’t need a daily check-in, it’s a good idea to review your score at least twice a year to mark your progress and check your trends. If it’s going in the wrong direction or seems off from where it should be, take a long look at your credit report to see what’s being reported. Keep in mind, you’ll want to make sure you’re looking at the report that was sourced in the score. Different credit reports may contain different information (and different errors).
Of course, there’s nothing wrong with checking your credit score more often, but there are a few instances where checking really won’t do you much good.
When Not to Check Your Credit Score
Before a job interview
Many employers use a credit check as part of the application process, so you may feel the urge to take a fresh peek at your credit score ahead of an interview (or before hitting send on your resume).
Don’t bother. While your potential employer may be looking at certain bits of your credit history, they aren’t actually looking at your score. These checks are primarily to see if there are any glaring red flags (excessive missed payments, a suspiciously absurd amount of debt, etc.). If you’re concerned, you’ll want to review your complete credit report. The score just doesn’t matter in this instance.
Immediately after paying off a large amount of debt
Clearing a massive chunk of debt from your ledger is personally satisfying and, eventually, very likely to help improve your score. But credit reporting is almost never instantaneous. Most creditors update their reporting every 30 to 45 days.
Which means that if even if your credit card account shows a nice $0 balance, your credit report may not reflect that yet. The positive steps you take today may not show up in your credit score for two months or more, so be patient.
After getting a raise or a promotion
While you can certainly treat yourself to a brand new FICO Score to celebrate your career successes, your income and career status have no bearing on your credit score. Having more money certainly makes it easier to keep up with your bills, but it won’t boost your score in the slightest.
If you're curious about your score or need one-on-one help understanding your credit report and how to improve your relationship with credit, schedule a credit report review today.