Know your credit score.
Did you see the first post on credit score? I just couldn’t fit it all in one so here is more information…
Who looks at your credit score? Banks, credit card companies, department stores (for credit cards), cell phone/phone company, potential employers… Whenever you apply for credit, or generally anything having to do with money or employment they run a credit report. It is also important for you to know that it is unlawful for a company that you have not authorized to pull your credit report!
What goes into figuring your credit score? Whether you are on time or behind is the single biggest piece (35%) of your credit score. How much you owe is the next biggest piece (30%). Those two pieces account for over 1/2 of your credit score. Pretty important stuff. The other 35% is made up of length of credit history, how much new credit you have and what type of credit. Go here for a lot more detail on what goes into your credit score.
How does your credit score affect you? I joked above that it is your financial future but it is actually your financial right now. If you are considered a credit risk, on the low end of the range discussed above, banks either will not extend credit to you or they will at a very high interest rate. Conversely, if you have great credit you will be approved for a loan much faster and interest rates will be should be great compared to market rates.
If you have bad credit will it follow you forever? It depends on how you react to it now. You can take steps to improve your credit therefore increasing your likelihood of being approved and securing a low interest rate. If you choose to ignore it and continue to live status quo well, don’t expect your credit to get any better.
What steps can you take to improve your credit score? The catch-22 with credit is that you have to have credit to have good credit to get approved for loans and low interest rates. 1. Pay your bills on time. As you saw above, this is the single most important factor. 2. Do not apply for department store credit cards just for the discount! 3. Keep balances away from the limit i.e. if you have a limit of $10,000 on a credit card, do not hover just below $10,000. Pay it down. 4. If you have a credit card or department store card from years ago and don’t use it anymore but it is paid off, let it lie. Length of credit history is important too. 5. Do not skip a payment! Always, always make a payment on your credit accounts.
What if I have a bankruptcy or bad nicks on my credit report? A bankruptcy can potentially stay on your credit report for 10 years but don’t fret, you can take the steps above to work on repairing your credit!
By making a conscious choice to better your credit score, you can change your future for the better too.
- Did you see Single Mom’s tip – week 2 on couponing?
- Move on to Single Mom’s tip – week 4 on paying bills online.