How is your Credit Score is it time for a credit checkup? Here are a few items to ensure you don’t pay extra interest due to a poor credit score. But it can be more than just an interest rate hike, a credit score might effect insurance rates, apartment rental, or a potential new job!
What is a credit score? Dictionary.com says that credit is:
There are a few different credit scores, but I’m focusing on the FICO score as it is most widely used by banks or major lenders now.
A FICO Credit Score can generally fall between 300 and 850, the latter being the better. Or a high score wins in this case. It is predicting the likelihood of your intention to pay the bills or loans on time.
Credit Score Tips:
- Pay those Bills! Preferably pay them on time. Set up bill-pay with your bank, then no cost of stamps or forgetting to mail that bill. Additionally “Payment History” is weighted as 35% of your FICO score. Lenders are concerned about ability to pay that loan that you are about to take out and the credit history is the best indicator they have of receiving future payments. Unfortunately, younger lenders will have lower scores because they do not have history.
- Review your own credit report: Some credit card companies offer this on the monthly statement. This is free and an easy tool to monitor what is happening with on that credit card. There are free sites out there that offer credit reports:
- Discover credit card shows a monthly FICO score with your bill.
- Caution: IF a site asks for a credit card number or provides your credit with a fee, this might become a recurring fee, beware that this isn’t the case before you check your score! Equifax shows some good tips on monitoring so it may be worth the price.
- Pay down credit cards: “Debt Level” is weighted at 30% of your FICO score. Which ironically enough if you keep your credit at about 30% of your credit limit or less this will help you score go up (which is good). For example: If my Home Depot credit card has a credit limit of $500, then I should keep the balance at $150 or less. ( or $500 x 0.30=$150)
- Use Credit: But be smart about it. Zero interest for 6 months is a no brainer, but pay the balance off within those six months. Use bill pay to your advantage here. Auto payments for six months and done!
- Monitor Credit Report: Different from reviewing your credit report, as monitoring means re-visiting the credit report to ensure there isn’t any weird. For example, and strange loans or new credit cards need to be investigated.
- Mix of Credit: the “Mix of Credit” is weighted at 10% of the FICO score, but its not worth it to run out to get an auto loan or personal loan to go with your credit card debt.
- Other options: Be caution of items that can hurt your credit like Debt Settlement.
- Get Equifax Business Credit Monitoring Now!
Don’t Do This:
- Don’t close old credit cards: This can play into the “Length of Credit History” which is weighted at 15% of the FICO score. Additionally, getting into credit cards at a younger age can be a double edge sword. I fell into this at college, signing up for a credit card and buying those books, only to pay more in the long run with high interest rates.
- Limit applications for new credit: “inquiries” are weighted at 10% of the FICO score. Each time they run a credit check it is an application for new credit. This means any application for an apartment, auto loan or new in store credit card are inquires. These all have an impact on your credit score.
Use these tips wisely. Do you have any other tips to boost that credit score?
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