Believe it or not, your credit report can affect your investment portfolio in either a positive or negative way, which makes it an important factor for building wealth and reaching future financial goals. Here’s why your credit profile is so important and what services you can use to monitor it.
Understanding how credit affects your investments is vital if you want to stay out of debt, save for the future, and be able to afford the things you want.
Here’s how it works and how it affects your finances.
Three Major Credit Bureaus
When you start building credit, whether through applying for your first loan or for your first credit card, your payment history and information gets reported to three major credit bureaus.
These credit reporting agencies are what financial institutions, insurance companies, and even a landlord will use when verifying your financial information.
Your credit history plays a big part in your financial goals and can hinder your journey to building wealth if you don’t manage it properly.
How Your Credit Score Affects Your Money
In addition to setting aside money for traditional investments or an IRA or other retirement plan, you may want to start investing in real estate, and your credit report will play a big role in this. If you have poor credit history, you won’t be able to apply for mortgages and may even be rejected on certain types of insurance related to protecting your investment properties.
As mentioned above, many insurance companies take your credit history into consideration when calculating your premium. So the better your credit score is, the less you’ll have to pay toward the cost of insurance. This applies to long-term care insurance as well as health insurance, both of which will affect you during your retirement years.
As your wealth grows and you become more conscious about your money, you need to start monitoring your credit report on a regular basis. Why? By monitoring your credit report, you can:
- Make sure your credit is on the right track
- Review for errors and incorrect information
- Quickly warn you of identity theft
- Gauge your progress on financial goals
For these reasons, you should make checking your credit report a regular habit that’s part of your monthly financial routine. At the very least, you want to check in on a quarterly basis, as well as annually using the completely free (and Federal law approved) AnnualCreditReport.com website.
In addition to AnnualCreditReport.com, there are other free services you can use for monitoring your credit regularly.
Quicken’s Credit Score Feature
With Quicken’s 2016 version came the ability to generate your personal credit score for free. Quicken pulls your personal information from one of the three most popular credit bureaus and generates your credit score each month.
If you already use Quicken’s service (or have been thinking about using it), this is a great feature to help monitor your credit score. It’s also a good reminder to keep your overall credit usage in mind as you build your portfolio and build wealth for the future.
The only downside is it will produce a credit score figure for you individually but not for your spouse. So even if you both use Quicken for joint accounts, only one of you will be able to monitor your credit score.
Quicken uses Equifax to aggregate personal information.
Credit Karma’s Credit Tool
If you’d like a free way to aggregate all of your financials, including bank accounts, credit cards, loans, and even your mortgage, as well as your credit report, then Credit Karma is a great choice.
In the past, they offered their service for free, but it only included a look at your entire credit history and accounts. Now they’ve upgraded to allowing you access to your credit score for free as well.
In addition to seeing your entire financial situation at a glance, they also offer access to monthly credit monitoring, credit reports, and your credit score, all for free. Their best feature has to be the Credit Score Simulator, which explains how certain financial moves, such as taking on more debt, incurring a tax lien, or even filing for bankruptcy, will affect your credit report.
Credit Karma uses TransUnion to generate credit information.
Mint’s New Credit Option
Another great service to check out is Mint’s new Credit Score option. If you use Mint.com for your personal finances, you may have seen this feature added to your account already. Simply log into your free Mint.com account and scroll down to the Free Credit Score section, then click on “show details.”
Your credit score will be displayed and updated each month. You will be alerted when something happens that affects your credit report, like closing an account or paying off a loan, so you can accurately monitor the activity.
If you don’t have a free Mint.com account you can still access your credit score and report information, but it comes with a monthly subscription cost of $16.99.
Aside from that, you can view your overall credit card usage and balances, along with your bill payment history. The total amount of accounts you have, and the age of your accounts, will also be displayed in this section.
The reporting for Mint’s credit score service comes from Equifax.
After testing out a few different credit monitoring services, these are the best free options we feel good about recommending. But of course, you should do your own research and see which one is best for you and your finances.