Have you ever played Craps? You roll the dice and you hope and pray that you get the numbers you need to win big. If you don’t, well, then you lose big. The same could be said about your credit score, three tiny little digits that can affect your life in many ways.
It’s not uncommon for landlords to check your credit prior to renting to you, for potential employers to inquire before you get to interview, and finally, credit can play a role in determining rates you pay for insurance, cable and utilities. As credit reporting agency Experian explains on its website, “credit information provides insight into an applicant’s integrity and responsibility towards his or her financial obligations.”
What is a credit score?
The term “credit score” is a number between 300 and 850 using a formula that was developed by the Fair Isaac and Company (now called FICO). This number is used by lenders as a snapshot of your credit history and a summary of risk involved in lending to you. The score is calculated based on an analysis of a person’s credit history and files. The assumption is that a higher score equals a higher creditworthiness; person will more likely pay their debts whereas, a person with a 300 lower score is considered highly likely to miss payments.
Just like those important three numbers can impact your life, I say if you follow the rule of three to manage your credit you’ll keep yourself on a path to a higher FICO score.
Rule One – Pay all of your bills on time, every time.
Rule Two – Keep your credit card balances low. 30% or lower AT ALL TIMES is a good rule of thumb. Too many consumers think that their billing cycle corresponds to when your creditor reports to the reporting companies which is highly unlikely to happen.
Rule Three – Open new credit only when you need it.
If you’re in a bad credit or low credit situation, give us a call at 602-429-6789 or contact us through our website, we can advise you on ways to increase your FICO score in ways you may have not have thought about. Ideally you should set a goal. Reduce the amount you owe to 30%, reduce your total credit utilization, again, maintain a good payment history, we cannot stress this point enough. This is the most important aspect of your credit score. Lenders want to make sure they get their money back from people they lend to and they want it on time.
It’s also a good idea to check your credit score from time to time. It may sound hard to believe, but individuals may share your name and credit-reporting companies can make mistakes. In addition, we have all heard of identity theft. You just want to make sure that the items on your report are actually yours. There are a number of different sources where you can obtain a free copy of your credit report. Per the Federal Trade Commission (FTC), you’re entitled to one free copy of your credit report every 12 months from each of the three nationwide credit reporting companies. Here is a link to the FTC’s website where you can find more information to obtain your free report today.