credit healthWe talk a lot about credit health on our personal finance blog, but you might find yourself wondering what exactly we mean by this term. Whether you’re a total novice when it comes to matters of credit or you are simply seeking a deeper understanding of the topic, this post will help you understand the meaning of credit health as well as answer some of the most common questions, so you don’t miss any steps toward improving or maintaining your credit.

The financial actions you take determine your credit health

Credit is a complex topic, which is why people try to find ways to relate it that are easier to understand. Credit health is one of those methods, as most of us are familiar with the concepts of healthy and unhealthy when it comes to our bodies. Much like things you do can help or harm your personal health, different actions you take financially can impact your credit health. We’ve discussed quite a few of the steps you can take to improve your credit’s health (or maintain it, if you’ve already got healthy credit) in the past. Sometimes, things beyond your control can impact your credit — such as becoming the victim of financial fraud — but the most important thing to remember about your credit health is that it can always be improved. It may take time and discipline, but over time, anyone can take their credit health from poor to excellent.

Some of the things that can impact your credit health include …

  • Your bill payments (e.g., if you make payments on time or in full).
  • How much credit is available to you, and how much of it you’re using (also known as credit utilization ratio).
  • The length of your credit history (e.g., how many accounts you have, how old they are, how recently you used them).
  • What types of credit accounts you have.
  • Hard inquiries on your credit reports in recent years.
  • Public records information (e.g., judgments, liens, bankruptcies).

How can you give your credit a checkup?

In order to ensure that your credit stays healthy, you will need to give it regular checkups, just like visiting the doctor to keep an eye on your personal health. Your best methods for checking on your credit health are looking at your credit scores and viewing your credit reports. There are a number of ways you can do this, but you should aim to check up on them at least once annually to ensure there aren’t any problems that need your attention. Problems can be anything from legitimate issues, like a bill you forgot to pay that went to collections to fraudulent activity or errors, which must be disputed with the credit bureaus to get removed from your reports. Every U.S. adult is entitled to one free copy of each of their credit reports from the three primary credit bureaus — Equifax, Experian and TransUnion — once every 12 months through the government-run website AnnualCreditReport.com. Note that you will need to pay a fee to also view your credit scores through AnnualCreditReport.com, but if you’d prefer not to, there are some other ways to see credit scores available to you. Just note that not all credit scores are created equal, and free scores provided by certain businesses may not be the same scores that a lender or credit card provider sees when checking your credit.

If you want to be able to continuously keep a finger on the pulse of your credit health, you will want to opt for a service like credit monitoring that allows you to see regular updates of your scores and reports. This will allow you to watch your progress as you take actions to improve your credit health, as well as keep an eye out for potential road bumps that might deter your progress. Many of these services provide information from all three credit bureaus, which is important, since few creditors report to all three — meaning it’s possible to miss something entirely if you’re only looking at data from Experian, not Equifax or TransUnion. Additionally, they’ll provide you with insight on what’s affecting your credit health and how you can tackle those symptoms to make it better.

What can you do if your credit health is poor?

If your credit is bad, average or even simply less-than-perfect, you might be wondering how you can fix it up. Depending on what it is that’s making your credit sick, you will have a number of options available to you for improvement. Discussing matters with a professional financial planner can be helpful if you aren’t sure which way to turn, or you can simply keep reading our personal finance blog for tips and tidbits on maintaining healthy finances. The most important thing to remember is that your credit can’t “die,” so there’s always a potential to make it better, so long as you’re willing to put in the work.