We recently had to put a new, expensive tile roof on our house, and we didn’t have enough to pay for the entire job, so my husband and I applied for a home equity line of credit.
When we went to meet with the banker, she coolly informed us that my credit was better than Kevin’s, so my name would go first on all the documents.
Of course, I had to gloat a little. We both have excellent credit, so I’m not sure why my score was over 800, and his was lower (although still excellent), but it was a sweet little opportunity for some momentary teasing.
Credit scores, however, are not a topic to be taken lightly. Most of us, especially women, never give them much thought. But if you don’t pay careful attention to paying your bills on time and reducing your debt, you’ll quickly discover that a credit line you need—for something important like fixing a leaky roof or buying a car—might be out of reach. If you discover yours isn’t enough, it’s important to take steps to improve your credit score.
Your credit score, also known as FICO, is calculated from your credit report. It basically tells the lender how big of a risk you are as a borrower. Your credit score can range anywhere from 300-850, and the higher the score, the better. When you apply for a car loan, student loan, home loan, or credit card, your credit score is used by the lender to determine how much they will lend you and what your interest rate will be. The more risky you seem, the lower the limit they’ll give you—and the higher the interest rate they’ll charge you. That’s important to know because it’s those high interest rates that create the high payments that prohibit many of us from paying down and paying off our credit cards.
Credit scores, however, are not a topic to be taken lightly.
Below are some recommendations for improving your credit score and keeping it healthy:
1. Only use 30% or less of your available credit across all your cards. So, if you have three cards with a combined credit limit of $10,000, don’t rack up more than $3,000 of it without paying it off.
2. Set up payment reminders on all your cards so that you pay all your bills on time. Even one late payment can downgrade your credit score. If you miss a payment, get current as quickly as possible and stay current. The longer you pay your bills on time after a problem, the more your FICO score should increase.
3. Pay more than the minimum due whenever possible.
4. Continually pay down debt. This demonstrates you are a good credit risk.
5. Don’t open new cards you don’t need, and don’t close cards just to improve your credit score. Also, be aware a closed account will still show up on your score.
6. If you are new to establishing credit, don’t open too many cards too quickly.
7. Check your credit score at least once a year. Sites such as creditkarma.com will allow you to access your credit score for free on a regular basis, providing credit scores from both TransUnion and Equifax. The scores I received from these two agencies were 14 points apart and, to be fair to my husband, are now more aligned with his.
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