Did you know that your poor credit costs you money? Boosting your score can save you money. Your credit score is a number based on how well you pay back loans, called a FICO score. The higher the score, the less risky you are. The 3 credit score companies are Experian, Equifax and TransUnion.
Your goal is to get a score hopefully above 620. That is what creditors are looking for. If you are below the 600 mark, banks won’t loan you money at a decent rate. If your grandma knew your credit score was that low, she would not loan you any money either. If you can get the score above 700, you get the lower rates. If you can get above 760, you will normally get the lowest rates. Perfect score is 850. Average score is 723 (I am told).
Under the Fair and Accurate Credit Transactions Act, you can obtain one annual free copy of your credit report. But you will still have to pay a fee to get your actual score. Huh? They’ll give you your credit history, but the actual number, well, they can charge you normally $6.
Here are the top 5 tips for improving your credit score:
1. Pay your bills on time – ALWAYS. If you pay late, then your bill shows up in a special area called “Adverse Accounts” and it lists what month you were late and how late you were. Think its OK, it only happened 3 years ago – wrong. They keep the list for 7 years. Yes, seven long years. Paying your bills on time can raise your score as much as 20 points just in one month.
2. Keep you credit card balances low. Maxing out your credit cards can lower your credit score by 70 or more points.
3. Don’t open any credit cards you don’t need. New accounts lower your credit score by an average of 10 points. Even having checks on your credit will lower your score.
4. Have 1 -2 credit cards at most. Yes, you must have an installment type loan and its OK. You tend to be a higher risk if you do not have any accounts that show that you are stable in paying. Just pay them off on time and keep them low.
5. Closed accounts do not go away. They stay on your report for up to 7 years. So do not get unnecessary cards or loans. Do not switch cards all the time, this will ding our credit.
The main lesson is, pay your bills on time. If you can’t pay cash for it, can you afford it? I like to live by the line, “If I can’t pay for it with cash, then I don’t deserve it.”
