Holly Johnson's post (“The high cost of keeping up with the Joneses”) got me thinking about a number of things this week, but mostly about how people manage their credit. Obviously, if you're intent on keeping up with the Joneses and you're living above your means, that house of cards is going to fall, right? And the reality is that time and good behavior are what it will take to repair your credit after such a train wreck. The first step (obviously, again) is to determine what your credit score is and to track your progress as you address your debt situation.
If, on the other hand, you're someone who actively manages their finances and is always looking to improve their financial picture, do you also monitor your credit score to improve it? And if so, what do you do?
You can always get your free credit report at the government's official site, annualcreditreport.com, but that isn't your credit score and so it provides rather limited insight into your credit situation. You can pay to get your credit score from one of the bureaus or get it when you're denied credit, but otherwise you're in the dark if something changes. It would be much better to see your credit score on a regular basis so you can determine if your decisions are helping you or hurting you. This becomes even more relevant if you're anticipating a job change, making a large purchase like a home or a car, or even getting married or divorced. Does having a lot of open accounts improve your credit score? Would it be better to close some accounts?
Last year we asked, “Is credit monitoring worth the money?” but now some of these services are free. At WisePiggy.com (a sister site of GetRichSlowly.org), for example, they do a soft-pull from TransUnion every 30 days so you can monitor your score anytime; then every 90 days, they analyze your credit report and give you a report card so you can see how specific factors like payment history and credit mix impact your score — all of which is free. The objective is to optimize your credit so you qualify for lower insurance premiums, better loan terms and great credit cards.
One commenter, Jim, summed up his experience nicely:
Not worth it during periods of status quo. In times of simple maintenance of finances, CreditKarma, CreditSesame, and Quizzle, plus your three free full annual reports (one from each bureau) is plenty to monitor for any changes, just make sure you turn on the email alerts. I do all this, plus I do MyFICO $5/mo daily monitoring and quarterly FICO score update.
During times of risk, such as preparing credit for applying for a new loan, divorce, or if free monitoring indicates potential identity theft or fraud — then full-on monitoring is worth it. When all is back to status quo, then, drop that expense. It has value, and it is, unfortunately, an exchange of money for something you do not have access to.
Lifelock and their competitors are a convienience-fee business. You can do everything they do yourself for free, and their insurance is so tightly actualized that most identity theft successes while locked are not covered. The insurance is virtually worthless, so its all about convenience.
How do you manage — and improve — your credit situation? Do you prefer to monitor your credit report and your credit score yourself, or do you prefer a dashboard tool that provides a snapshot and advice on how to improve your score? Do you use a free service or do you pay for monitoring?