What Everyone Should Know About Credit Scores

Do you know what your credit score is?  Do you know how it might affect your life?  Do you have any ideas about how to improve it?

You may be familiar with the term “FICO” score, which stands for the Fair Isaac and Company score.  These are the credit scores used to determine your credit risk, also known as the credit bureau score and these scores are used to determine interest rates and credit offers.  You will generally get the best rates if your score is 700 or higher.  There are 3 nationwide consumer credit reporting companies: Experian, TransUnion, and Equifax.

The first step to improving your credit score is to check your credit report.  You can request 1 free copy per year.  Make sure to check this report for any errors.  Be sure to note that the amounts owed are correct and that there are no errors on late payments.  After you have verified that the information on your credit report is accurate, there are a few important things to keep in mind:

  1. Pay down any existing credit card debt.  Keep good records of what you owe and come up with a plan to repay your debt.  It is best to pay off your cards with higher interest rates first, while continuing to make sure that you make payments (even if they are the minimum payments) on all credit cards.
  2. Pay bills on time.  If you do make a late payment, call your credit card company and ask for this to be removed.  Sometimes they will make a “goodwill adjustment”.
  3. Understand your outstanding debt.  Many times the amount of debt you have is compared to your credit limits.  So, if you owe amounts close to your credit limit, this can be detrimental.

For more information, go to the Federal Trade Commission’s site – Building a Better Credit Report:

http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre03.shtm

Remember, better credit scores lead to better interest rates and decreased insurance rates!

-Lory M.

(Check out our course available at: http://www.sagepf.com)

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