How to finally understand your credit report (and make it work for you)

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  • Credit reports and scores can be a source of needless stress
  • Facing your credit challenges is the first step to improvement
  • Check out our 2-Bureau Credit Report and Score in your dashboard for a simplified report that breaks down the key factors of your credit profile.

You’re much more than your credit score.#

That little number can be distressing if it’s not as high as you want (or need) it to be. And it can be easy to get sidetracked by how society quantifies who we are, especially when it comes to money and how we exist as creditworthy or as a ‘credit risk’ in the eyes of lenders and creditors. This can make many of us feel (and act) like a deer in headlights.

There’s a solid psychological reason for this, by the way. Drazen Prelec, a professor at MIT’s Sloan School of Management, and a pioneer in the field of neuroeconomics (the psychology of money), says, “credit [is] insidious because [it disconnects] the pleasure of buying from the pain of paying.”*

Whether it’s an auto loan, medical bill or credit card debt, pretty much anyone can relate to the good feeling of getting something they want or need right away and then the not-so-good feeling of having to pay for it later.

One of the best ways to improve your credit is to be informed about it

Know where you stand. Know your score. Know your report. Know it inside and out. Don’t avoid it anymore. We know that most credit reports are filled with confusing data that hasn’t been analyzed. So it just looks like a bunch of pages of dates and numbers, past and current creditors. It doesn’t tell you what anything means or how your credit score is calculated. At best, it’s just frustrating.

If you haven’t used credit wisely in the past, you can end up with a dinged up credit report and a low credit score, two things that can stand in the way of your success and be downright demoralizing.

Not surprisingly, people with high credit scores and excellent credit reports tend to check their scores and reports more often, diligently monitoring their progress and checking for potential errors. Those with lower scores just don’t want to focus on the negative. It’s not that they don’t care; they often just feel powerless to change it.

If your credit score is low, don’t despair

Let’s face it. The credit system in this country is complex. In order to have a really good credit score, you generally have to not use the credit you have. That’s a no brainer for people who have more cash flow, but it’s much more challenging for those who don’t.

Because if something unexpected in your life happens – like sudden job loss, injury, divorce, new child care, etc. – you might find yourself racking up debt to pay for those events. And the more debt you take on, the more it can signal to the credit bureaus that you may be a risk to lenders, making it even harder for you to get auto or home loans at a low rate, if you’ll even qualify for a loan at all.

In other words: the credit system can be stacked against people who experience financial ups and downs. If you’re well off and always flourishing financially, great for you. But if you’re not, it’s not so great. The good news is that you are not alone – at all! Having fair to poor credit can make people feel a sense of shame or embarrassment, even though there are plenty of other people just like you looking to solve their credit issues, too.

Face it – and then change it

Getting ahead – and staying ahead – in terms of credit can be challenging. But there are solid ways you can achieve it.

Watch your score like a hawk

We realized this was a big hurdle for most people so we recently introduced an easy-to-understand 2-Bureau Credit Report and Score sourced from 2 of the major credit bureaus – TransUnion® and Equifax – that breaks it all down for you with clear percentages that show you exactly what credit behavior counts the most towards your score.

You’ll quickly grasp how your score is calculated, allowing you to focus on ways to improve actions you’ve made in the past or avoid others in the future. We’ve also made it so that you can easily spot differences between your two credit reports, which may be helpful to spot mistakes that might be dragging down your credit score.

All you have to do is log in to your MoneyLion dashboard to get started. If you haven’t looked at your credit in depth in a while, it’s a little like ripping off a Band-Aid. Kind of intimidating at first but then not such a big deal at all. And you’ll find, step by step, you’re finally on your way to healing.

*From MIT Spectrum ‘The Psychology of Spending’ 1999

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