You’ve heard the advice since starting your first job: a high credit score is the key to financial bliss. As important as it was then, a high credit score can also help provide financial stability as retirement nears. Fortunately, it’s now easier than ever to protect your credit and keep tabs on your credit reputation, which can come in handy if you’ll want to take out a loan, get a new credit card, apply for a job or purchase car or homeowners insurance.
It just takes these three steps:
1. Monitor Your FICO Score
Your FICO score is your financial fingerprint for your bill-paying habits. This creditworthiness shorthand, reduced to a numeral (from 300 to 850, the higher the better), helps lenders determine whether to approve you for loans and credit cards and what interest rate to charge. Employers also use it to learn about job applicants, and homeowners and auto insurers check prospective policyholder credit scores to determine their premiums.
According to the research firm ValuePenguin, the average FICO score in the U.S. is 695; 30% of people in their 50s have scores over 780, which is considered excellent.
Generally speaking, credit scores improve as we get older: 42% of people in their 60s and 55% of those over 70 have credit scores of 780 or better.
Lately, it’s become pretty painless to monitor your FICO score (or a similar credit score). Many banks and credit card companies provide the number on customers’ monthly statements and online. Discover was one of the first, but others such as Bank of America, Barclaycard, Chase and Citi have followed.
Check to see if your card issuer provides this service.
2. Protect Yourself Against Identity Theft
In addition to keeping an eye on your FICO score, take the necessary steps to ensure you don’t become a victim of identity theft. When someone steals your name, address, Social Security number or other identifiers to make purchases or open credit card accounts, your ability to get credit is at risk.
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A few ways to keep identity thieves at bay:
- Shred bank, credit card and other financial statements. Better yet, sign up for online statements to deter thieves from stealing your mail or going through your trash.
- Scrutinize bank and credit card statements regularly for potential irregularities.
- Never provide personal financial information over the phone to a person or company you don’t know.
- Don’t access your bank or credit card websites using public Wi-Fi. Identity thieves can electronically pilfer your data if you do.
- File your 2016 tax return as soon as you can, if you haven’t already. In the past couple of years, identity thieves have been busy filing fraudulent tax returns and making off with tax refunds.
If you do become an identity theft victim, visit the Federal Trade Commission site, IdentityTheft.gov, for help developing a personal recovery plan.
3. Check Your Credit Report Often
Order a free copy of your credit report at least once a year to check for fraudulent activity.
The Fair Credit Reporting Act requires the three largest credit bureaus (Equifax, Experian, and TransUnion) to provide you with a free copy every 12 months if you ask. Go to AnnualCreditReport.com — the only government-authorized source for free credit reports — to get yours.