One of your creditors has just sent you a notification in the mail that your credit limit has been increased. Before you finish reading the letter, you see visions of those hot new pumps you eyed last week dancing in your head. What’s a girl to do? To charge or not to charge, that is the question! We like to look our best, do our best and feel our best, but a poor financial history could do you in for future investments much larger than those Manolo Blahnik wedges. Creditors are looking at your credit score, a snapshot of your credit history. Here are a few ways to cut corners to raise your credit score, and keep a little change in your clutch:
Get a copy of your credit report:
Transunion, Experian and Equifax are credit reporting agencies that monitor your credit. You may contact any of these agencies to receive a copy of your credit report. Costs will run you $14.95-$24.99 per copy. Use that laptop that you can’t live without and request a free copy of your credit report at www.annualcreditreport.com. You can receive one free credit report a year from each reporting agency. Tip: Request a report from one reporting agency every four months to monitor your credit score all year. It can take anywhere from two to six months to see a major increase in your score.
What to look for:
Believe it or not, more than 1,000 people in the country share the exact spelling of your first and last name. Sometimes, credit reports contain information and credits that do not belong to the owner. It’s your right to contact the credit reporting agencies and inquire about credit accounts that you have not applied for.
- Fraud or Identity Theft
Somebody wants to be you! Identities are stolen everyday simply by rummaging through trash and finding discarded bills that contain social security numbers and other personal information. If you think an unauthorized person is using your credit card, contact the credit reporting agencies immediately and close the accounts. File a police report and a complaint to the Federal Trade Commission. For more information, log on to www.ftc.gov. Tip: When you discard bills, shred them immediately.
- Your Credit Score is Crucial
Your credit score is a score given by credit reporting agencies based on the information provided on your credit report. Also known as the FICO score, it ranges from 500, the lowest to 850, the highest. The average American’s credit score is about 678. It is sometimes referred to as your financial life’s bloodline. The score dictates how low or high your interest rate on major purchases, such as vehicles or homes will be or how much credit you can get. A low credit score can also cost you a great job, as many employers look at prospective candidates’ scores.
Now you know your credit score. Put in the work to improve it.
What’s Included in Your Credit Score:
- Your payment history counts for 35 percent of your score.
Pay your bills consistently and on time! No one wants to lend money to someone who never pays their debts back.
- How much money you currently owe on bills counts for 30 percent of your score.
Keep your balances as low as possible to increase your score.
- The length of your credit history counts for 15 percent of your score.
How established is your credit history? Often individuals can be turned down for new credit because they have not had credit long enough. If you’ve had a credit account for about 24 months, you’re on the right track. Maintaining a healthy and consistent relationship with your creditors can go a loooong way.
- How much new credit you have counts for 10 percent of your score.
Only get credit you absolutely need! Excessive credit accounts and even inquiries may only decrease your score. Hard as it sounds, when that saucy little sales rep asks if you want to apply for a MAC credit card, JUST SAY NO!
- The types of credit you have counts for ten percent of your score.
Are you versatile in your credit? Do you have revolving credit accounts such as retail credit cards and installment accounts, such as car notes or mortgages? This shows your flexibility in paying your bills, which may boost your score.
What’s Not Included in Your Credit Score:
- Your race, driving record, sexual orientation or age is not included in your credit score.
- You are not penalized for checking your credit report or score, including when shopping around for the best car or mortgage rates. Be sure to shop around within 30 days to show a pattern on your credit report.
What you need to do:
- Pay your bills on time every time.
- Keep your current credit account balances as low as possible.
- Don’t apply for new credit unless necessary.
- If you pay off an account you’ve had for a long amount of time, do not close it.
- Stay focused on your financial goals
Remember ladies, it will take longer to raise your credit score than it did to drop it. There is no real way to predict how many points your score will increase when following the rules. Be patient! Check your score every two to four months to see some real progress. Before you know it, not only will you have the kind of money that jingles, but you’ll have the kind that folds.
Information used from MyFico.com.