How to Rock Your Credit Score


Credit Score

Credit ScoreYour credit score is of huge importance to your financial future.  You’ve no doubt been warned about your credit score rating since you were a pimply teen, looking to get that first credit card. Being able to pop a Visa out in front of the guys and pay for pizza, was a pretty cool feeling at 17 years old.

As teenagers, we get it; We need to make sure and pay our bills because otherwise our credit score drops and we can’t get a car later.  Yada, yada, yada.. okay. Thanks Mom. Thanks Dad. Whatever.

And so it goes, the cycle of another teenager hearing but not listening.  Often times, we learn too late that our credit score isn’t high enough, and that just maybe, we should have paid a bit more attention to the folks way back when.

Unfortunately, the lesson of credit is often learned too late.  The lesson being that even paying our bills on time doesn’t necessarily reflect in a high credit score.   It’s a disappointing thing to learn we have bad credit at the most inopportune of times. It’s being declined for that new Canon T4i camera when you had plans to shoot photography with it all afternoon.

And don’t be satisfied with an average credit score.  While you may still get the car loan you wanted, the difference in having an average score and a high score can result in significantly higher finance charges.  If you’re buying your first home and have a low credit score, the compounded interest can add tens of thousands of dollars to the final payoff price.

mortgage late payment effect
FICO Banking Analytics Blog

So just what is a good credit score?  What do we need to do to ensure that we can have whatever we want when it’s time to lay the plastic down?

Be knowledgeable of the following Top 10 Credit Score Factors, some of which may surprise you:

1) Your age has absolutely no affect on your credit score.  Whether you’re 16 or 68, age is not calculated into your credit score in any way (though the age of your credit history can play into the equation).

2) Your marital status does not affect your credit rating – Is you’re fiancée wanting to push the wedding day up by six months because she’s tired of not having a credit card and counting on your superb credit to get back on track?  You can inform her that moving the wedding up will have to be solely motivated by her grandiose love for you. Your credit score is your credit score and hers is hers.

3) Keep your credit card balance low and don’t apply for many different credit cards at the same time. A well-maintained low balance actually helps your credit score more than a zero balance.  You get credit for continually managing your credit card properly, as opposed to being rewarded for tossing your plastic in the sock drawer.

4) How you handle the money on your debit card does not affect your credit rating.  If you had four overdrafts last month, you might be looking at a hefty penalty by your bank and eating less this month but the overdrafts have no bearing on your credit report.

5) Checking your own credit score will not hurt your credit.  It’s long been a myth that checking your own credit score will hurt you but it’s simply not true.  Always be aware of what your score is and check often.

6) Pay Your Bills on Time.  When Mom and Dad allowed you to have that first credit card, it was in hopes of helping you to learn about money.  If you’re being declined for a purchase based on your credit score, give your parents a pat on the back for mission accomplished.  You have now learned something about money.  It’s time to start rebuilding credit.

7) Don’t max out your credit card(s).  Just because the available credit is there doesn’t mean you should use it.  Maxing out a credit card decreases credit score. Lender’s like to know that you spend on your card but you don’t live on it.

8) Credit repair companies are worthless.  If you have negative scores on your credit report, the only way to fix that is by paying the bills and rebuilding credit as described herein.  A credit repair company relies on ignorance of the consumer to believe he is being helped.  The only “extra” you’ll get is the extra fee the credit repair company charges you.

9) Check your credit report often to ensure that it’s free of errors.  There are a surprisingly large amount of errors made on credit reports but you’ll never know this if you don’t stay on top of your credit report.  You can check your credit score at annualcreditreport.com

10) Pay off newer debt first. In trying to raise your credit, get a copy of your credit report and pay off the newest balances first.  If you simply can’t afford to pay everything, the older balances will fall off the report before the newer ones.

Young, first-time credit card owners are typically the worst about paying their line of credit on time, mistakenly believing a few days won’t have a significant impact.  Slow payments affect credit score far more than most people realize.  A late payment of more than 30 days can lower a score by 100 points.

Find out how well you understand how a credit score is created by taking the free quiz at creditscorequiz.org.

What’s a Good Credit Score?

credit score funnyA “good” score falls in the range of 680 to 724. It’s enough to get you a respectable interest rate on the purchase of a new home.

A “great” score is in the range of 725 to 759. Getting credit should be a breeze and you probably have a single instance of negative feedback, such as a late payment to Best Buy for that 55′ inch TV and surround sound.
It was football season. We completely understand.

A “superb” score would be in the 760-850 range. You’ve managed every aspect of your credit with an over-achieving and polished attention to detail. Lenders love you. They’re practically begging you to borrow money from them.

No matter where you currently stand with your credit score, you can rock your credit score number by focusing on a superb credit score in the next few years.  The advantages are well worth it.

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