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How to Spot Credit Trouble

How to Spot Credit Trouble

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In today's financial landscape, maintaining a healthy credit profile is crucial for various aspects of our lives, from securing a mortgage to obtaining favorable interest rates on loans. However, credit trouble can sneak up on us if we're not vigilant.

Read on to learn more about the key indicators of credit trouble and discover practical strategies to address and prevent potential issues.

7 Strategies to Spot Credit Trouble

1. Regularly Check Your Credit Report

One of the most effective ways to spot credit trouble early is by regularly reviewing your credit report.

Your credit report contains information about how you've used credit in the past 10 years. Everyone has a credit report at each of the three major credit bureaus: Equifax, Experian and TransUnion. Most creditors report to all three bureaus, but it's worth checking all three to see if any information appears on only one.

Every major credit bureau allows you to request a free copy of your credit report at minimum once every 12 months. Look for discrepancies, inaccuracies or suspicious activities that could be indicators of identity theft or reporting errors.

2. Monitor Your Credit Score

Keeping an eye on your credit score is an excellent way to monitor your credit health and spot trouble as soon as possible.

Your credit score is a numerical representation of your creditworthiness. A sudden drop in your credit score might signal financial difficulties or issues with your credit report.

Companies like Experian and Credit Karma provide free access to your credit score, making it easy to keep an eye on any fluctuations.

3. Limit High Credit Card Balances

High credit card balances are one of the most common sources of credit trouble, so it's important to limit your spending and lower your balance when possible.

Excessive credit card debt can be a red flag for potential credit trouble. If your credit card balances are consistently high or nearing the credit limit, it may indicate financial strain to credit bureaus, resulting in a lower score. Aim to keep your credit utilization ratio below 30% to maintain a positive credit profile.

4. Curb Late or Missed Payments

Making late payments – or missing them altogether – is a big no-no in the world of credit health. Make sure to maintain a regular bill paying schedule to keep your credit score in check.

Consistently making late payments or missing due dates is a significant warning sign of credit trouble. Late payments not only incur fees but also negatively impact your credit score.

Set up automatic payments or reminders to ensure bills are paid on time and in full. Our Bill Pay feature is an excellent tool to make sure you never forget to pay a bill.

You can also use our Skip-a-Pay feature to put your Apple FCU loan payment on pause when you need a little extra cash in your wallet.

5. Don't Ignore Collection Notices and Debt Settlement Offers

Whatever you do, never ignore collection notices or debt settlement offers.

Receiving collection notices or debt settlement offers from creditors is a clear indication that you are behind on payments. Ignoring these notices can lead to further damage to your credit score.

Instead, communicate with creditors to discuss repayment plans or settlements to avoid severe consequences.

6. Notice Increased Interest Rates or Denied Credit

If you fail to qualify for certain loans or interest rates, it's likely because of issues on your credit report.

The central purpose of credit reports and credit scores is to indicate to lenders the type of borrower they are dealing with. If you are not qualifying for loans or are approved at high interest rates, it's because lenders may perceive you to be a risky borrower, which could be a result of credit trouble.

If you are denied a loan or are approved at a high rate, ask your lender to explain their decision. It's likely that their decision is based on item(s) on your credit report, which can give you some insight on where/how to improve.

7. Inquire About Unexplained Credit Inquiries

Paying attention to your credit activity is about more than improving your own financial habits; it can also help you spot fraud and stop it in its tracks.

Unauthorized credit inquiries on your report could be a sign of identity theft. Regularly check your credit report for any inquiries that you did not initiate, and report them to the credit bureaus immediately.

We also recommend enrolling in Allstate Identity Protection to protect you from falling victim to identity theft. For a small fee a month, Allstate provides advanced monitoring and near real-time alerts to help detect threats to your identity and finances so you can protect what you've worked so hard to build.

Spotting credit trouble early is essential for maintaining financial stability and securing future opportunities. By staying vigilant, regularly monitoring your credit report and score and taking proactive steps to address any issues, you can safeguard your creditworthiness and enjoy the benefits of a strong financial foundation.

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