There are lots of numbers you should know off the top of your head. Your doctor’s phone number, your bank account balance, and your kids’ shoe sizes. Another number that is often overlooked that’s important to keep track of is your FICO® Credit Score. While you may not need to check it every day, ignoring your FICO® Score until you need it can be a big and costly mistake.
What is your FICO® Score?
If you aren’t familiar your FICO® Score is a score that tells lenders if you’re credit-worthy. It’s calculated based on past payments, amounts you owe, credit history, and more.
Below is a breakdown of how your FICO® Score is calculated.
Why should you care about your FICO® Score?
It’s vital to have an excellent to good score in order to qualify for low-interest rates and higher lines of credit.
If that’s not reason enough, let me tell you a tale of a mysterious late payment and a FICO® Score that dropped nearly 100 points while buying a home.
Yes, it’s my story. Before the advent of The Centsible Life I wasn’t quite as financially savvy. And I made mistakes. A lot of them. But the biggest mistake was not paying attention to my FICO® Score when it really, really mattered.
7 years ago when we were prepping to purchase our house. We got pre-approval, knew our budget, and started shopping around for a house. It took a long time to find our house-it was several months before we found “the one.”
Nearly 6 months after getting our pre-approval we contacted our lender to finalize our financing. On the phone our lender told us there was a problem. It seems that my FICO® score had dropped. Dramatically. Nearly 100 points! It put me in a lower tier making our interest rate skyrocket. This was not good.
So I did what you did 7 years ago and got online to get my credit score and report. After I paid through the nose for the info, I found the culprit. A late payment. But the story doesn’t end there. It wasn’t actually a late payment.
In a series of misfortunate events, while I had been distracted by two car garages and hardwood flooring one of our credit card accounts was closed and moved to a new account number. Somehow we were never notified. We didn’t get paper statements, and I paid that account automatically. So my automatic payment? It was going nowhere. My new account? It had a small balance, but was piling on late payments and fees. Oops.
Even though it was the bank’s fault and we were able to get it removed from my credit report the process takes several weeks. We didn’t have several weeks.
In the end it all turned out okay. We got the house at the lower interest rate by only using my husband’s credit. The late payment was removed from my credit report several weeks later. We added my name to the house when we refinanced a year later (and scored an even lower interest rate!).
But if I had been more careful and monitored my account my credit report and FICO® Score more closely we wouldn’t have had to jump through all those hoops and deal with a metric ton of stress.
Now you know you’d rather be paying attention to it than ignoring it, but what’s an easy (AND FREE!) way to do it without a lot of hassle? Discover card has you covered.
Discover Helps You Track Your FICO® Score
Discover recently launched an exclusive offer for cardmembers to track up to a year of their FICO® Credit Scores for free. As the first major credit card issuer to proactively provide FICO® Scores for free on cardmembers’ monthly statements, Discover is now helping cardmembers stay on top of their credit, better understand fluctuations in their score and avoid surprises.
With Discover’s FICO® Score for free offering, cardmembers:
- Can view up to a year’s history of their FICO® Credit Scores
- Receive key factors from their credit history impacting their scores – available online
Want to know more? Head over to Discover and learn more or sign up for a new Discover card today.
Disclosure: This post is sponsored by Discover. I was compensated for my time as part of the Discover Preferred Blogger Network. All opinions are my own.