Give yourself some credit!

It can reach the point where you don’t want to pick up the mail or answer the phone. There isn’t anything to look forward to anyway, who writes letter’s anyway? The daily mail invariably consists of a few pieces of colorful junk mail and yet another pesky bill to pay.

Believe it or not, those pesky bills are the ticket to your financial well being. The way you handle those bills can make a difference that you can measure on the bottom line of your family finances. 

A good credit score ( and the higher the better) is rewarded with good loan rates and access to money when you need it. A low credit score can cost you extra, even on your home mortgage, where the debt is secured against your home. You may find your self refused credit, and just when you need it the most.

You should check your own credit score at least once a year, to insure that all the information in your life is accurate. You have a right to access your own credit record through services like Equifax or Transunion. There may be charges for mailing or downloading your file, but it can pay to know your own credit score.

It is helpful to understand what is behind that credit score: what impacts your score and what lenders are looking for when they check your credit.

When those pesky bills come in, ( even if it is a $15 department store credit card charge!) do you pay them on time? Your payment history is a significant factor in your credit score. If you have paid your bills late, had an account that has gone to collections, or heavens forbid declared bankruptcy, then your credit score will drop accordingly.    

How much money do you owe? Lenders will look for a nice comfortable buffer between your debt and your credit limits. If your credit card or your line of credit are always teetering at the top of their limits, that is also likely to have a negative effect on your credit score.

How long is your credit history?  Lenders will be interested to know how long you have been a borrower. If you have a long credit history with a good repayment record, you will score high in this component. A short credit history makes it difficult for lenders to assess your risk , however if you pay your bills in a timely manner and maintain low credit balances, these good habits can off set a short credit history.

Have you applied for new credit lately? A lender will be able to see if there have been other “inquiries” on your credit report. If you have requested new credit several times in a recent period, your score may be affected. Don’t worry about routine checks or inquiries from your existing lenders. These should not impact your credit score.

How much credit do you have and what types of credit do you use? Both too much and too little can lower your credit score. Lenders will be looking for a record of established credit accounts with good payment histories. Too many credit cards, or accounts with high interest finance companies can also affect your credit score.

So what does not affect your credit score? Personal information such as your race, religion, sex or marital status are neither recorded or scored in your credit history. Perhaps surprisingly, your salary, occupation and employment history are not relevant to your credit history.

This year, whether or not you intend to take out a mortgage, or borrow money, you should check your credit history and ensure that all the information contained there is accurate. You want to know what any future lender can see. Secondly make those pesky bills in your mail box you new best friend. Be systematic about your bill paying routine and reap the financial rewards! 

Lastly if you require assistance in making heads or tails out of your newly received credit report, just let me know and I will be happy to translate it for you so you can understand it properly.

Cheers,

Pat